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Navigating market volatility: Lessons from past crashes and the power of FINQ’s AI

  • November 22, 2023
  • 7 min read
  • Uncover FINQ's use of AI to analyze past market crashes, enabling better investment choices and the potential to exceed S&P 500 performance.
  • Learn key historical market downturns, from the Great Depression to the 2022 crash, and their lessons for modern investing.
  • Explore investor behavior in volatile markets, underscoring FINQ's data-focused, unemotional investment strategy.
  • Discover FINQ's AI-powered tools—FINQFIRST, FINQLAST, FINQEDGE, and FINQFULL—and how they help guide investors through market fluctuations with clarity and assurance.

The stock market is unpredictable, with its sudden drops and soaring peaks. It's enough to make any investor's head spin. Remember those big market crashes we’ve all heard about? They're scary stories that also have valuable takeaways. 

That's where FINQ comes into the picture, turning those events into data points. With the advanced capabilities of FINQ's AI-driven analytics, you gain more than just market insights. You receive financial insights on when and what to buy or sell, leveraging historical data to strategically outperform the S&P 500 according to various investment strategies. In other words, you're no longer just throwing investment darts in the dark, hoping for the best. You're making informed decisions based on advanced analysis. 

A walk through history: Key stock market crashes

The ruins of past stock market crashes dot financial history, each a monument to the complex interplay of economic forces and human emotion. As we explore these tumultuous times in market history, we uncover the underlying causes and their profound consequences on investors, economies, and governments worldwide. More importantly, we learn lessons that shape our approach to investing today.

The Great Depression (1929)

A speculative frenzy swept the stock market in the late 1920s, disconnecting share prices from their intrinsic values. The market peaked and then plunged, banks failed, and the world plunged into the Great Depression. The lesson from this seismic event was clear: the need for regulatory oversight to prevent over-speculation, safeguard against banking system collapses, and the government’s role in stabilizing the economy during downturns.

The Oil Crisis (1973)

In 1973, geopolitical tensions reached a critical point when an oil embargo was imposed by OPEC, leading to soaring energy prices and stock market declines. The crisis taught markets the importance of geopolitical awareness and the need for diversification in energy sources. It also led to a greater understanding of how energy prices and availability can profoundly impact global economies.

Black Monday (1987)

The crash of 1987, known as Black Monday, was a stark demonstration of the market’s vulnerability to automated trading and the domino effect of global stock exchanges. The aftermath brought about the implementation of circuit breakers and new trading regulations, emphasizing the necessity of market safeguards to temper the pace of selling and prevent panic-induced crashes.

The Dotcom Crash (2000)

The collapse of the tech-heavy NASDAQ index by the early 2000s resulted from excessive investment in internet-based companies, many of which lacked viable business plans. The bust of the dot-com bubble served as a lesson in the importance of fundamental investment analysis and the potential dangers of speculative excess in emerging industry sectors.

The Financial Crisis (2008)

The 2008 financial crisis was precipitated by a housing market collapse under the weight of subprime mortgages and compounded by opaque financial instruments. This crisis underscored the necessity of financial transparency, the risks of complex derivative products, and the importance of credit quality in lending practices.

The Covid Crash (2020)

The stock market crash of 2020, driven by the onset of the COVID-19 pandemic, showed how external health crises could rapidly affect global economic stability. It highlighted the importance of swift fiscal and monetary policy responses and market resilience in the face of sudden, non-financial shocks.

The 2022  Mini Crash

In 2022, a combination of factors, including inflationary pressures, the end of low-interest rates, and geopolitical unrest, led to a significant downturn. This crash is a reminder of the market's sensitivity to monetary policy and economic fundamentals, the challenges of navigating inflationary environments, and the ongoing need for international cooperation in managing global economic risks.

Understanding market volatility and investor psychology

Transitioning from the sweeping historical events of market crashes, we turn to the granular, day-to-day realities of market volatility and the psychology that drives investor behavior. Volatility is not just a statistic; it's a palpable force that can govern decision-making through the psychological minefields of investing, often with profound consequences. 

How market volatility affects investment decisions

Market volatility refers to the frequency and magnitude of price movements, both up and down, in financial markets. It measures the market's temperament and can be influenced by economic data, geopolitical events, and social sentiment. High volatility often signals uncertainty, which can lead to changes in investor behavior. For instance, some investors may see in volatility an opportunity to buy assets at lower prices, adopting a contrarian strategy. Others may interpret the same market conditions as a signal to exit, prioritizing capital preservation over the potential for returns. Volatility can test investors' risk tolerance, prompting actions that may or may not align with their long-term investment goals.

How the fear and greed cycle links to investor behavior during crashes

Two primal emotions deeply influence investor psychology: fear and greed. These emotions create a cycle that can amplify market movements. Fear can lead to panic selling during crashes as investors rush to liquidate holdings and minimize losses. This herd behavior can exacerbate market declines and capitulation, where even the most disciplined investors may abandon their investment principles. Conversely, greed can drive investors to ignore warning signs and take on excessive risk during market highs, aiming to maximize gains but often leading to inflated asset bubbles. Understanding this cycle is key to recognizing that investor sentiment can often detach markets from underlying economic fundamentals, leading to mispriced assets and irrational market behavior.

Treating market volatility as just another data point with FINQ

Trying to time the market is a losing strategy. Investing is more about understanding your risk tolerance and sticking to your plan. Market volatility often intimidates even the most seasoned investors. But FINQ takes a cool, calculated approach. For FINQ, market swings are nothing more than another data point. 

Insights into market conditions as data for FINQ

Market conditions, for FINQ, are distilled into quantifiable data points, stripping away the emotional weight they carry. As per the above-mentioned insights, attempting to time the market is futile and statistically disadvantageous. Instead, FINQ's technology leans on continuous portfolio optimization, ensuring investors are always in the market and suitably positioned, come rain or shine. Research by Charles Schwab backs this up, suggesting that holding out for the "right time" can cost more than it's worth. In fact, statistics show that missing the market's top-performing day could shrink your wealth by 10%, and missing out on the top 10 days could slash your 20-year returns by half

Utilizing FINQ in diverse market scenarios

In the face of diverse market scenarios, FINQ's automated rebalancing remains a steadying force. The technology does not falter during recessions, crashes, or over-optimism; it identifies buying and selling opportunities based on scientific analysis of stocks' relative value. This approach transcends the conventional wisdom of fear during downturns and overpaying when greed is winning.  "The word recession means nothing to FINQ—there are always stocks to buy and stocks to sell". Herein lies the advantage of leveraging FINQ's insights: it's about gaining confidence and not avoiding the market during downturns and upturns but rather actually making use of them by maneuvering through them with precision and gaining better returns.

"The word recession means nothing to FINQ—there are always stocks to buy and stocks to sell."

FINQ’s technology for insightful buy and sell decisions

FINQ’s AI and machine learning algorithms stand on top of market data, interpreting and learning from patterns to guide investment decisions. This technology is indifferent to market sentiments, focusing solely on the data. "Our AI doesn’t have feelings... It changes nothing, and actually probably the opposite—it will get us better results". The AI's objectivity is crucial, enabling it to provide insights on when to possibly buy and sell, regardless of market volatility. This continuous learning and adaptation process aims to yield favorable outcomes by leveraging very basic theoretical issues and data points. 

"Our AI doesn’t have feelings... It changes nothing, and actually probably the opposite—it will get us better results."

The advent of FINQ: Turning data into actionable insights

FINQ's innovative platform offers users a suite of portfolios designed to bring clarity to stock analysis. With AI-driven solutions translating complex market data into digestible insights, investors have a more streamlined path to make decisions.  

FINQFIRST, FINQLAST, FINQEDGE, and FINQFULL: Harnessing AI in investment

FINQ's suite of stock offerings — FINQFIRST, FINQLAST, FINQEDGE, and FINQFULL — eliminates the guesswork in stock selection. By harnessing a vast pool of data, these tools blend professional wisdom, crowd wisdom, and company fundamentals into a coherent and accessible format.

  • FINQFIRST: FINQFIRST cuts through the market noise to deliver a daily curated list of the top 10 stocks to buy.  
  • FINQLAST: In contrast, FINQLAST focuses on identifying the bottom 10 stocks, presenting opportunities for profitable short-selling.  
  • FINQEDGE: FINQEDGE is a dual-pronged approach. It offers a daily updated list of the top stocks to buy and the worst to short-sell, providing a balanced strategy to maximize returns on a minimized investment amount.
  • FINQFULL: While not a portfolio per se, FINQFULL is the go-to solution for navigating today's information-saturated markets, checking your stock rating,  It offers a clear, all-encompassing view of S&P 500 stocks, continuously updated to reflect market changes, ensuring investors always have the latest, most thorough rankings easily accessible.

How FINQ's advanced technology helps market insights and investment signals

FINQ's innovative platform slices through the complexity of financial data with its revolutionary STOCKS-AI technology, providing investors with sharp and accurate insights for navigating the market's chaos. By transforming intricate data sets into straightforward actions, FINQ facilitates wiser and swifter investment decisions grounded in a robust, data-centric approach that strips away emotional bias. FINQ achieves this with a systematic system that guarantees the accuracy and relevance of its insights, empowering investors to cut through market chaos with confidence.

  • Comprehensive data collection and intelligent structuring: FINQ  assembles data from diverse sources, focusing on public sentiment (crowd wisdom), professional market insights (professional wisdom), and detailed company fundamentals. Data points include sentiment analysis from the media, insights from financial experts, and a deep dive into company financials. Utilizing advanced AI, similar to ChatGPT, it digitizes and stores this information for easy, in-depth analysis.
  • Transforming data into actionable insights: FINQ filters out the noise to concentrate on scientifically valid information. Financial products are broken down to their essence, assessed for genuine value and risk, and assigned a continuous scientific score by AI. This innovative scoring system gives investors a clear, comparative research perspective.
  • Continuous analysis for real-time decision making: FINQ's real-time data processing keeps investors ahead of the curve with the latest information, essential in the fast-moving stock market world, where yesterday's data is old news.

Preparing for the future with FINQ's insights

Investors increasingly seek solid ground with economic forecasts often as reliable as weather predictions. But with FINQ, data-driven, emotionless decisions are the norm, not the exception. FINQ empowers investors to look beyond the horizon and prepare for what's to come by cutting through the noise and distilling the market's complexity into actionable insights.

Equipping investors with AI products

With the power of AI, FINQ equips investors with the products to understand the market's movements, turning potential downturns into strategic opportunities. Instead of reacting to market shocks with panic, FINQ users can rely on a steady stream of insights that help them stay the course or adjust when necessary. It's about building a resilient portfolio that can weather storms and capitalize on the winds of change. With FINQ, investors don't just brace for the future; they prepare to meet it head-on.

Final words

The financial world spins faster every day, and keeping up with it is no easy task. That's where technology—and specifically FINQ—comes into play. It's not just about the convenience it offers; it's about survival in the swift currents of global finance. FINQ doesn't just crunch numbers; it identifies patterns, guiding informed investment choices through the market's highs and lows.

30+ years of experience in investment management and investment banking with technology and VC expertise have made Tamir a cornerstone of the investing community. Tamir is also a public figure in the financial sector, served as a judge in the local Shark Tank TV show, and is a regular panel member in the local and foreign media. Tamir is the founder and CEO of the Tamir Fishman Investment House.