Wall Street Shows Its ‘bouncebackability’: McGeever

By Jamie McGeever

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

This Britishism is generally related to cliche-prone soccer managers trumpeting their groups’ ability to respond to beat. It’s not likely to find its way across the pond into the Wall Street crowd’s lexicon, but it perfectly sums up the U.S. stock market’s durability to all the problems, 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 cast doubt on America’s „exceptionalism“ in the worldwide AI arms race.

Any among those problems still has the possible to snowball, triggering an avalanche of offering that might push U.S. equities into a correction and ura.cc even bear-market area.

But Wall Street has become incredibly resilient since the 2022 rout, especially in the last six months.

Just look at the synthetic intelligence-fueled turmoil on Jan. 27, stimulated by Chinese start-up DeepSeek’s discovery that it had developed a big language design that could attain similar or much better outcomes than U.S.-developed LLMs at a fraction of the cost. By many procedures, the market relocation was seismic.

Nvidia shares fell 17%, slicing nearly $600 billion off the company’s market cap, the most significant one-day loss for any company ever. The worth of the broader U.S. stock market fell by around $1 trillion.

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

But this epic move didn’t crash the market. Rotation into other sectors sped up, and around 70% of S&P 500-listed stocks ended the day higher, indicating the wider index fell only 1.45%. And buyers of tech stocks soon returned.

U.S. equity funds drew in nearly $24 billion of inflows last week, technology fund inflows hit a 16-week high, and momentum funds attracted favorable circulations for a fifth-consecutive week, according to EPFR, the fund streams 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 streams … suggest that a number 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 sudden bounce from a 33-year low against the dollar triggered worries that investors would be forced to sell assets in other and nations to cover losses in their substantial yen-funded bring trades.

The yen’s rally was extreme, on par with past monetary crises, and the Nikkei’s 12% fall on Aug. 5 was the greatest 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 vanished quickly. The S&P 500 recovered its losses within 2 weeks, and the Nikkei did likewise within a month.

So Wall Street has passed two big tests in the last six months, a duration that included the U.S. presidential election and Trump’s return to the White House.

What explains the resilience? There’s no one obvious response. Investors are broadly bullish about Trump’s financial program, the Fed still appears to be in reducing mode (for now), asteroidsathome.net the AI frenzy and U.S. exceptionalism narratives are still in play, and liquidity is abundant.

Perhaps one crucial motorist is a well-worn one: the Fed put. Investors – a number of whom have spent an excellent piece of their working lives in the age of extremely loose monetary policy – may still feel that, if it actually comes down to it, the Fed will have their backs.

There will be more pullbacks, and dangers of a more extended downturn 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 columnist for Reuters.)

(By Jamie McGeever; Editing by Rod Nickel)