Monitoring Portfolio News Using AI

QuantStreet’s approach

Our approach to the news summarization problem involves three steps:

1. Collect daily news headlines and article snippets. Keep these in a central storage repository for later use.
2. Access a state-of-the-art large language AI model (LLM), ideally switching to the newest model version when it becomes available.
3. Periodically collate the last several days’ or weeks’ worth of news, combine this with information about portfolio positions, and feed the combined text data (potentially hundreds of pages of text) to the LLM to summarize the news flow and explain how each portfolio position is impacted by the news.

Because this is not a process that can be implemented on one’s home PC, we use Google Cloud’s compute infrastructure, for scheduling and running jobs, storing the captured data, and then feeding the collated text file into a Gemini LLM using the Vertex AI platform. This process took us a few days to set up, but without access to the cloud compute, storage, and AI architectures, it would have taken a team of engineers months (if not longer) to create something similar.

Caveats

Setting up this monitoring process highlighted something that dedicated readers of financial news already knew from experience: News headlines predominantly skew negative. (This is something the academic literature has also pointed out.) Without providing the model proper context, the LLM’s interpretation of recent news flow also skews highly negative.

In fact, asking the naive question, “How does this set of news impact portfolio positions?” often leads the model to come up with rather cataclysmic interpretations that are not useful for making actual portfolio decisions. Prompt engineering — i.e., asking the LLM model the right set of questions — is a crucial component of designing a proper AI-driven workflow, and it took us some time to develop a prompt that leads to reasonable answers in our use case.

Below is the model’s analysis of news flow, as of the evening of Saturday, June 21, 2025. The news fetch did not include the U.S. attack on Iran’s nuclear infrastructure, so you will not see this specific event covered in the analysis. Also, despite our careful prompt design, the model’s analysis still skews negative for many portfolio positions. The human decision-maker ultimately must account for this negativity bias in their interpretation of the model output, but the LLM’s ability to synthesize large amounts of news data and explain succinctly how these impact multiple portfolio positions is stunning.

Gemini’s analysis as of June 21, 2025

The following section was generated by the Gemini AI model and is provided for educational purposes only. It has been lightly copy-edited for clarity. QuantStreet does not verify or endorse its accuracy. Actual outcomes may differ. Please see the full disclosure at https://quantstreetcapital.com/substack-disclaimer.

1. Summary of news events

Recent news is dominated by escalating geopolitical tensions, primarily the intensifying conflict between Israel and Iran, with increasing discussion of potential U.S. involvement and its impact on global markets, particularly oil prices. Alongside this, the ongoing war in Ukraine and U.S. domestic political actions, including presidential directives on immigration and military deployments, contribute to a climate of uncertainty.

Technologically, news highlights the continued advancement of AI, with new models and applications emerging from major tech companies, though concerns about AI’s societal impact (e.g., job displacement, misinformation, data privacy) and operational risks (e.g., mistaken bans, bad advice) are also present. The successful launch of a new gaming console and major data breaches underscore the dual nature of the tech sector.

In health, a resurgence of measles cases in the U.S. and the identification of a new, severe COVID subvariant indicate ongoing public health challenges. However, positive developments in medical research, such as an experimental cholesterol pill, gene therapy advancements (despite an associated death), and promising results for psilocybin in treating depression, suggest progress in healthcare innovation.

Economically, the Federal Reserve’s projections hint at stagflation concerns, adding to market caution. Discussions around potential changes to U.S. tax incentives for electric vehicles and renewable energy sources signal possible shifts in industrial policy. Consumer-focused news includes significant box office success for a new film, major sporting events, and labor policy changes affecting hospitality and agriculture sectors.

Overall, the news reflects a mix of significant geopolitical risks, continued technological innovation with associated challenges, persistent public health issues alongside medical breakthroughs, and a cautious economic outlook.

2. Summary of impact on each portfolio position

Here is an analysis of how the recent news impacts the operating fundamentals and risks of each portfolio position, sorted alphabetically:

• IAU (iShares Gold Trust)
  • Impact: Moderately positive
  • Confidence: High
  • Reasoning: The escalating conflict between Israel and Iran, with discussions of potential U.S. involvement, significantly increases global geopolitical uncertainty. News of the Fed’s economic projections hinting at stagflation (slow growth with high inflation) further contributes to a risk-off sentiment and inflation hedging. Gold (IAU) is traditionally considered a safe-haven asset, benefiting from increased geopolitical risk and concerns about economic instability or inflation. These headlines are likely to increase demand for gold, supporting its price.
• QQQ (Invesco QQQ Trust)
  • Impact: Mixed to slightly negative
  • Confidence: Moderate to high
  • Reasoning: QQQ is heavily weighted toward large-cap technology and growth companies. While there are positive developments in AI (e.g., Google Gemini 2.5 Pro, Midjourney AI video model, AI for brain understanding) that are tailwinds for many of its core holdings (e.g., Google, Meta), several headlines present significant risks. The massive data breach affecting Google, Apple, and Facebook poses material cybersecurity, reputational, and regulatory risks for these key components. Reports of Instagram’s AI-related mass bans point to potential operational and reputational challenges for Meta. Furthermore, Trump’s proposed bill to end EV subsidies is a direct negative for Tesla, a prominent QQQ holding, by potentially impacting demand for electric vehicles. The Amazon CEO’s comments on AI reducing corporate jobs could signal efficiency gains but also broader economic disruption concerns.

• VGK (Vanguard FTSE Developed Markets ETF¹)
  • Impact: Slightly negative
  • Confidence: Moderate
  • Reasoning: VGK has significant exposure to European and other developed non-U.S. markets. The heightened geopolitical tensions, particularly the Israel-Iran conflict and its potential for broader regional instability, pose a direct risk to global economic sentiment and supply chains that impact these international markets. While specific company news (like Estee Lauder founder’s death) or localized events (like the Air India crash) have limited broad impact, the overall increase in international political risk is a headwind. The potential for expanded U.S. travel bans could also indirectly affect international tourism and business, impacting some companies within VGK’s holdings.
• VGSH (Vanguard Short-Term Government Bond ETF)
  • Impact: Neutral to slightly positive
  • Confidence: High
  • Reasoning: VGSH invests in short-term U.S. government bonds, known for their safety and liquidity. In times of increased market uncertainty stemming from geopolitical conflicts (Israel-Iran) or domestic political tensions, there can be a “flight to quality” that benefits government bonds. While the Fed’s hint at stagflation could imply some interest rate uncertainty, short-term bonds are less sensitive to interest rate fluctuations than longer-term bonds. The primary operating fundamental for VGSH is the stability and backing of the U.S. Treasury, which remains strong despite political headlines.
• VOO (Vanguard S&P 500 ETF)
  • Impact: Mixed to slightly negative
  • Confidence: High
  • Reasoning: VOO represents broad U.S. large-cap equities. The escalating Israel-Iran conflict and the associated rise in oil prices are direct negatives, increasing market volatility and investor risk aversion (“Stock futures fall as investors eye Israel-Iran conflict”). The Fed’s stagflation concerns also signal potential headwinds for corporate earnings growth. While the underlying positive trends of AI adoption continue to benefit many S&P 500 companies through efficiency gains, these are counterbalanced by the immediate and significant geopolitical and macroeconomic risks highlighted in the headlines. The large data breach also represents a broad risk to consumer and business trust, impacting numerous companies.
• VXUS (Vanguard Total International Stock Index Fund ETF Shares)
  • Impact: Negative
  • Confidence: Moderate
  • Reasoning: VXUS offers broad international equity exposure, including both developed and emerging markets. The intensifying Israel-Iran conflict has direct negative implications for Middle Eastern markets and significant potential for broader global economic disruption and increased risk premiums for international investments. The potential for expanded U.S. travel bans adds further uncertainty to international trade and tourism. While there was news of a peace deal in Rwanda/DR Congo, its impact is too localized to significantly offset the broader geopolitical risks affecting a diversified international fund.
• XLC (Communication Services Select Sector SPDR Fund)
  • Impact: Mixed
  • Confidence: Moderate to high
  • Reasoning: XLC includes major technology and media companies (e.g., Google, Meta). The continued advancements in AI (Google Gemini 2.5 Pro, Midjourney AI video model) are fundamentally positive for these companies’ innovation and future growth. WhatsApp’s move to a subscription model and ads could also represent new revenue streams for Meta. However, these positives are significantly counteracted by negative news — particularly the massive data breach affecting Google, Apple, and Facebook — which creates substantial operational and reputational risk. Reports of Instagram’s AI-related mass bans also highlight potential platform instability and user dissatisfaction.

• XLF (Financial Select Sector SPDR Fund)
• • Impact: Mixed to slightly positive
  • Confidence: Moderate
  • Reasoning: The Senate’s passage of a stablecoin bill is a significant positive for the financial sector, providing regulatory clarity and potentially opening new avenues for growth in digital assets for banks and financial services firms. The private equity firm financing Harvard research also suggests continued robust activity in capital markets. However, the Fed’s hint at stagflation concerns could pose headwinds for traditional banking activities like lending, potentially impacting loan growth and asset quality. Geopolitical tensions could also contribute to overall market volatility, which can affect trading and investment banking revenues.
• XLRE (Real Estate Select Sector SPDR Fund)
  • Impact: Slightly positive
  • Confidence: Moderate
  • Reasoning: Trump’s directive to curb immigration enforcement at hotels and restaurants is a positive development for the hospitality sector, a significant component of real estate through hotel REITs and commercial properties. This policy could alleviate labor shortages and support demand for related commercial real estate. While there were reports of deadly flash floods, these are localized events that do not typically impact the diversified national portfolio of XLRE. Potential Medicaid cuts could negatively affect real estate related to rural healthcare facilities, but the broader impact seems limited compared to the positive for hospitality.
• XLU (Utilities Select Sector SPDR Fund)
  • Impact: Mixed to slightly negative
  • Confidence: High
  • Reasoning: The forecast for a significant heat wave across the U.S. is generally positive for utilities, as it drives increased demand for electricity for cooling, boosting revenues. However, the news that the Senate wants to end wind and solar tax credits is a significant negative for the utilities sector, especially for companies heavily invested in or planning to invest in renewable energy projects. This could increase the cost of capital for green initiatives or slow the transition to renewables, impacting future growth and profitability for a segment of the sector.
• XLY (Consumer Discretionary Select Sector SPDR Fund)
  • Impact: Mixed to slightly negative
  • Confidence: High
  • Reasoning: Trump’s move to curb immigration enforcement at hotels and restaurants is a positive for the hospitality and restaurant subsectors within XLY, by ensuring labor supply and supporting operational stability. The strong box office performance of “How to Train Your Dragon” and the FIFA Club World Cup indicate healthy consumer spending on entertainment and leisure. However, Trump’s proposed bill to end EV subsidies is a significant negative for Tesla, a major holding within XLY, which could dampen EV sales and impact the company’s fundamentals. The broader economic concerns, including hints of stagflation, could also lead to reduced consumer spending on nonessential goods and services, posing a risk to the entire sector. The massive data breach could also erode consumer trust and impact online spending habits.

¹ The model in this case indicated the wrong fund name but the correct ticker. The fund name associated with VGK is the Vanguard FTSE Europe ETF.

Harry Mamaysky is a professor at Columbia Business School and a partner at QuantStreet Capital.

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