Wall Street Shows Its ‘bouncebackability’: McGeever

By Jamie McGeever

ORLANDO, Florida, grandtribunal.org Feb 5 (Reuters) – “Bouncebackability.”

This Britishism is usually associated with cliche-prone soccer managers trumpeting their groups’ capability to react to defeat. It’s unlikely 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 strength to all the problems, shocks and everything else that’s been thrown at it recently.

And there have 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 recently cast doubt on America’s “exceptionalism” in the worldwide AI arms race.

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

But Wall Street has ended up being remarkably durable given that the 2022 thrashing, especially in the last 6 months.

Just look at the synthetic intelligence-fueled chaos on Jan. 27, stimulated by Chinese startup DeepSeek’s discovery that it had established a big language design that might attain similar or ai-db.science better results than U.S.-developed LLMs at a portion of the expense. By lots of procedures, the market relocation 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 broader U.S. stock market fell by around $1 trillion.

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

But this legendary relocation didn’t crash the market. Rotation into other sectors sped up, and around 70% of S&P 500-listed stocks ended the day greater, implying the broader index fell only 1.45%. And purchasers of tech stocks soon returned.

U.S. equity funds attracted almost $24 billion of inflows recently, technology fund inflows struck a 16-week high, and momentum funds drew in favorable circulations for a fifth-consecutive week, according to EPFR, surgiteams.com the fund streams tracking company.

“Investors saw the DeepSeek-triggered selloff as a chance instead of an off-ramp,” EPFR director of research study Cameron Brandt composed on Monday. “Fund flows … suggest that many of those financiers kept faith with their previous assumptions 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 sparked fears that financiers would be required to sell possessions 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 financial crises, and the Nikkei’s 12% fall on Aug. 5 was the most significant one-day drop since October 1987 and 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 quickly. The S&P 500 recovered its losses within 2 weeks, and the Nikkei did similarly within a month.

So Wall Street has passed 2 big tests in the last 6 months, a that included the U.S. governmental election and Trump’s go back to the White House.

What explains the durability? There’s no one apparent answer. Investors are broadly bullish about Trump’s financial agenda, the Fed still seems to be in alleviating mode (for now), the AI craze and U.S. exceptionalism stories 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 actually invested an excellent portion of their working lives in the age of extraordinarily loose monetary policy – may still feel that, if it really boils down to it, the Fed will have their backs.

There will be more pullbacks, and risks of a more extended downturn 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 writer for Reuters.)

(By Jamie McGeever; Editing by Rod Nickel)