AI Triggered Market Crash

Investment Analysis Clubs Macro Economic Trends and Risks
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tailspin.

The Scenario: *Fast forward a few election cycles. A new president takes office. As per usual, a changing regime comes with a changing stance on economic policy. The nation’s new leader calls for sweeping regulatory changes that will increase government oversight and tighten financial controls that impact major U.S. corporations across every industry. Naturally, this changes the financial forecast for these companies. Expenses will increase and profits will drop – along with investor confidence. Stock prices fall and sales of shares accelerate. *

*This is nothing new. Differing stances on regulation, taxation and debt tolerance always trigger different market reactions. Take for example how both the Dow and S&P plummeted after President Trump’s announcement of broad import tariffs, only to rebound after some of those tariffs were rolled back. Powered by speculation and predictions, the stock market is volatile by nature. A little bit of uncertainty is all it takes to send stock prices into a tailspin. *

Only now, artificial intelligence is playing a bigger role in trading decisions, amplifying the effects of quick reactions that rule stock market fluctuations.

Overnight, the market tanks by 40% — more than the initial crash that market the start of the Great Depression in 1929 when the Dow dropped by 25%.

3 Likes
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We already have a market that is a huge dose of automated trading.

The margin debt is the problem. The capital expenditures on AI, a problem. The housing markets problems. ETC

Somone I work with, her husband is a contractor in NYC. The banks are later than ever in their payments. The banks are holding back payments.

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In my opinion, markets have always been driven by fear and momentum, but AI can compress that reaction into seconds. The part we should worry about is that the “reason” for the selloff may only become clear after the damage is done.

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I guess that means it continues to be important to understand the economics of businesses you invest in and to buy at a price with a margin of safety

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Opportunity costs. Yes.

They say you can’t time the markets. They can’t. But the last couple of years were made for “heroes”. Heroes to zeros.