Wall Street Shows Its 'bouncebackability': McGeever
By Jamie McGeever
ORLANDO, Florida, Feb 5 (Reuters) - "Bouncebackability."
This Britishism is normally associated with cliche-prone soccer managers trumpeting their groups' capability to react to beat. It's unlikely to discover its method across the pond into the Wall Street crowd's lexicon, but it perfectly sums up the U.S. stock market's strength to all the obstacles, shocks and everything else that's been tossed at it just recently.
And there have actually been a lot: U.S. President Donald Trump's tariff flip-flops, extended appraisals, severe concentration in Big Tech and the DeepSeek-led turmoil that just recently cast doubt on America's "exceptionalism" in the international AI arms race.
Any one of those problems still has the potential to snowball, triggering an avalanche of selling that could press U.S. equities into a correction and even bear-market area.
But Wall Street has become extremely durable given that the 2022 rout, specifically in the last 6 months.
Just take a look at the artificial intelligence-fueled chaos on Jan. 27, spurred by Chinese start-up DeepSeek's revelation that it had actually established a big language model that could attain comparable or much better results than U.S.-developed LLMs at a portion of the expense. By many measures, the marketplace relocation was seismic.
Nvidia shares fell 17%, slicing almost $600 billion off the firm's market cap, the most significant one-day loss for any business ever. The value of the broader U.S. stock exchange fell by around $1 trillion.
Drilling deeper, experts at JPMorgan discovered that the rout in "long momentum" - essentially purchasing stocks that have actually been performing well just recently, annunciogratis.net such as tech and AI shares - was a near "7 sigma" relocation, or seven times the standard discrepancy. It was the third-largest fall in 40 years for this trading technique.
But this legendary move didn't crash the marketplace. Rotation into other sectors sped up, and around 70% of S&P 500-listed stocks ended the day higher, indicating the more comprehensive index fell just 1.45%. And bphomesteading.com buyers of tech stocks soon returned.
U.S. equity funds brought in almost $24 billion of inflows recently, innovation fund inflows struck a 16-week high, and momentum funds attracted positive flows for a fifth-consecutive week, according to EPFR, the fund streams tracking firm.
"Investors saw the DeepSeek-triggered selloff as an opportunity rather than an off-ramp," EPFR director of research study Cameron Brandt composed on Monday. "Fund streams ... suggest that a lot of those investors kept faith with their previous presumptions about AI."
PANIC MODE?
Remember "yenmageddon," the yen carry trade volatility of last August? The yen's unexpected bounce from a 33 against the dollar sparked fears that investors would be required to sell assets in other markets and countries to cover losses in their huge yen-funded carry trades.
The yen's rally was extreme, on par with past financial crises, disgaeawiki.info and the Nikkei's 12% fall on Aug. 5 was the most significant one-day drop considering that October 1987 and the second-largest on record.
The panic, if it can be called that, higgledy-piggledy.xyz spread. The S&P 500 lost 8% in 2 days. But it vanished rapidly. The S&P 500 recovered its losses within two weeks, and the Nikkei did likewise within a month.
So Wall Street has actually passed two big tests in the last six months, clashofcryptos.trade a period that included the U.S. presidential election and Trump's return to the White House.
What explains the durability? There's no one obvious answer. Investors are broadly bullish about Trump's financial agenda, pipewiki.org the Fed still seems to be in reducing mode (in the meantime), the AI frenzy and U.S. exceptionalism narratives are still in play, and liquidity abounds.
Perhaps one essential chauffeur is a well-worn one: the Fed put. Investors - a number of whom have spent a great piece of their working lives in the age of extremely loose financial policy - may still feel that, if it truly boils down to it, the Fed will have their backs.
There will be more pullbacks, and threats of a more extended decline do appear to be growing. But for now, the rebounds keep coming. That's bouncebackability.
(The opinions revealed here are those of the author, a columnist for Reuters.)
(By Jamie McGeever; Editing by Rod Nickel)