Wall Street Shows Its 'bouncebackability': McGeever
By Jamie McGeever
ORLANDO, Florida, Feb 5 (Reuters) - "Bouncebackability."
This Britishism is generally connected with cliche-prone soccer managers trumpeting their teams' ability to respond to beat. It's unlikely to find its way across the pond into the Wall Street crowd's lexicon, but it completely summarizes the U.S. stock exchange's resilience to all the obstacles, shocks and everything else that's been tossed at it just recently.
And there have been a lot: U.S. President Donald Trump's tariff flip-flops, stretched appraisals, severe concentration in Big Tech and the DeepSeek-led turmoil that just recently cast doubt on "exceptionalism" in the worldwide AI arms race.
Any one of those concerns still has the prospective to snowball, causing an avalanche of selling that could press U.S. equities into a correction and even bear-market territory.
But Wall Street has actually become incredibly resilient considering that the 2022 rout, especially in the last six months.
Just take a look at the synthetic intelligence-fueled turmoil on Jan. 27, stimulated by Chinese startup DeepSeek's revelation that it had actually developed a large language design that could attain comparable or better results than U.S.-developed LLMs at a portion of the expense. By many procedures, funsilo.date the marketplace relocation was seismic.
Nvidia shares fell 17%, slicing almost $600 billion off the company's market cap, the greatest one-day loss for any company ever. The value of the larger U.S. stock exchange fell by around $1 trillion.
Drilling deeper, experts at JPMorgan discovered that the thrashing in "long momentum" - essentially purchasing stocks that have actually been carrying out well just recently, such as tech and AI shares - was a near "7 sigma" relocation, or seven times the standard deviation. It was the third-largest fall in 40 years for this trading technique.
But this legendary move didn't crash the market. Rotation into other sectors sped up, and elearnportal.science around 70% of S&P 500-listed stocks ended the day greater, meaning the more comprehensive index fell just 1.45%. And buyers of tech stocks quickly returned.
U.S. equity funds attracted nearly $24 billion of inflows last week, technology fund inflows hit a 16-week high, and momentum funds attracted favorable flows for a fifth-consecutive week, according to EPFR, the fund flows tracking firm.
"Investors saw the DeepSeek-triggered selloff as a chance rather than an off-ramp," EPFR director of research study Cameron Brandt composed on Monday. "Fund flows ... suggest that a number of those financiers kept faith with their previous presumptions about AI."
PANIC MODE?
Remember "yenmageddon," the yen bring trade volatility of last August? The yen's abrupt bounce from a 33-year low against the dollar stimulated worries that investors would be required to sell assets in other markets and nations to cover losses in their substantial yen-funded bring trades.
The yen's rally was extreme, on par with past financial crises, passfun.awardspace.us and the Nikkei's 12% fall on Aug. 5 was the greatest one-day drop given that October 1987 and akropolistravel.com the second-largest on record.
The panic, if it can be called that, spread. The S&P 500 lost 8% in two days. But it disappeared rapidly. The S&P 500 recovered its losses within two weeks, and townshipmarket.co.za the Nikkei did similarly within a month.
So Wall Street has passed 2 big tests in the last 6 months, sciencewiki.science a period that included the U.S. governmental election and Trump's go back to the White House.
What explains the durability? There's nobody obvious response. Investors are broadly bullish about Trump's financial program, the Fed still appears to be in relieving mode (in the meantime), the AI craze and U.S. exceptionalism narratives are still in play, and liquidity abounds.
Perhaps one essential motorist is a well-worn one: the Fed put. Investors - a number of whom have invested a good portion of their working lives in the age of extremely loose financial policy - may still feel that, if it truly comes down to it, the Fed will have their backs.
There will be more pullbacks, and dangers of a more extended recession do appear to be growing. But for now, the rebounds keep coming. That's bouncebackability.
(The viewpoints expressed here are those of the author, a writer for Reuters.)
(By Jamie McGeever; Editing by Rod Nickel)