Wall Street Shows Its ‘bouncebackability’: McGeever

By Jamie McGeever

ORLANDO, Florida, Feb 5 (Reuters) – „Bouncebackability.“

This Britishism is generally connected with cliche-prone soccer supervisors trumpeting their groups’ capability to react to beat. It’s not likely to find its method throughout the pond into the Wall Street crowd’s lexicon, but it perfectly sums up the U.S. stock exchange’s durability to all the obstacles, shocks and whatever 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, extreme concentration in Big Tech and the DeepSeek-led turmoil that just recently called into question America’s „exceptionalism“ in the global AI arms race.

Any one of those issues still has the potential to snowball, causing an avalanche of offering that could press U.S. equities into a correction and even bear-market area.

But Wall Street has actually ended up being extremely durable considering that the 2022 thrashing, particularly in the last 6 months.

Just look at the artificial intelligence-fueled turmoil on Jan. 27, stimulated by Chinese startup DeepSeek’s revelation that it had established a large language design that could attain similar or better outcomes than U.S.-developed LLMs at a portion of the expense. By many procedures, larsaluarna.se the marketplace move was seismic.

Nvidia shares fell 17%, slicing nearly $600 billion off the firm’s market cap, the biggest one-day loss for any business ever. The worth of the wider U.S. stock exchange fell by around $1 trillion.

Drilling much deeper, analysts at JPMorgan discovered that the rout in „long momentum“ – essentially buying stocks that have been carrying out well recently, such as tech and AI shares – was a near „7 sigma“ relocation, or 7 times the standard discrepancy. It was the third-largest fall in 40 years for this trading strategy.

But this impressive move didn’t crash the market. Rotation into other sectors accelerated, and around 70% of S&P 500-listed stocks ended the day greater, meaning the more comprehensive index fell only 1.45%. And purchasers of tech stocks soon returned.

U.S. equity funds drew in nearly $24 billion of inflows last week, innovation fund inflows struck a 16-week high, and momentum funds attracted favorable circulations for a fifth-consecutive week, according to EPFR, the fund flows tracking firm.

„Investors saw the DeepSeek-triggered selloff as an opportunity instead of an off-ramp,“ EPFR director of research Cameron Brandt wrote on Monday. „Fund streams … recommend that many of those investors 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 sparked worries that investors would be required to offer assets in other markets and countries to cover losses in their huge yen-funded carry trades.

The yen’s rally was severe, on par with previous monetary crises, and forum.batman.gainedge.org the Nikkei’s 12% fall on Aug. 5 was the biggest one-day drop given that October 1987 and the second-largest on record.

The panic, if it can be called that, spread. The S&P 500 lost 8% in 2 days. But it disappeared rapidly. The S&P 500 recovered its losses within 2 weeks, and the Nikkei did also within a month.

So Wall Street has passed 2 huge tests in the last six months, a period that consisted of the U.S. and Trump’s go back to the White House.

What explains the durability? There’s nobody apparent answer. Investors are broadly bullish about Trump’s economic agenda, the Fed still seems to be in alleviating mode (in the meantime), the AI craze and U.S. exceptionalism narratives are still in play, and liquidity is plentiful.

Perhaps one essential driver is a well-worn one: timeoftheworld.date the Fed put. Investors – much of whom have actually invested an excellent chunk of their working lives in the era of extremely loose financial policy – may still feel that, if it actually boils down to it, the Fed will have their backs.

There will be more pullbacks, and dangers of a more prolonged downturn do appear to be growing. But for now, the rebounds keep coming. That’s bouncebackability.

(The opinions expressed here are those of the author, a columnist for Reuters.)

(By Jamie McGeever; Editing by Rod Nickel)