From Financial Crisis to Technological Triumph — How #ArtificialIntelligence is Redefining Markets?
#BlackMonday (Oct. 19, 1987)
On October 19, 1987, known as Black Monday, the Dow Jones Industrial Average (DJIA) plummeted by almost 22.6%, the S&P lost 30% of its value, and the NASDAQ recorded its all-time one-day loss of 11.35%, triggering a global stock market decline.
The preceding bullish market, during which the DJIA gained 44% in seven+ months, raised concerns about an asset bubble. Negative news reports on the trade deficit and a falling dollar intensified market volatility in mid-October.
The crash was instigated by a series of sell-offs, fueled by negative news and the threat to devalue the US dollar. Structural flaws, such as an international investor influx and the rise of portfolio insurance, exacerbated the crash. These issues were subsequently addressed through regulatory reforms.
In response, the Federal Reserve ensured liquidity support and encouraged banks to continue lending. Despite initial concerns, their prompt actions helped restore investor confidence in the central bank's ability to stabilize the financial system.
Post-Black Monday, stock markets made a remarkable recovery, with the DJIA recouping 57% of its losses within two trading sessions. Less than two years later, the US stock markets surpassed their pre-crash highs, demonstrating resilience and recovery in the aftermath of the crisis.
#AI in Today's Market
Looking ahead, the integration of Artificial Intelligence (AI) in financial markets has ushered in a new era of data-driven strategies, enhanced risk management techniques, and more sophisticated market analysis.
Through its capacity to process large datasets and identify patterns, AI has transformed trading algorithms and predictive analytics, empowering investors to make more informed and timely decisions.
The use of AI in today's market has not only improved the efficiency of trading processes but has also contributed to the development of advanced investment strategies.
By harnessing AI, market participants can gain deeper insights into market trends, conduct sentiment analysis, and consider various other factors influencing asset prices.
AI has emerged as a critical component in managing market volatility and identifying potential risks more effectively.
While AI has shown promise in improving market efficiency and risk management, appropriate checks and balances are necessary to ensure its responsible and ethical use in the financial sector.