Wall Street Shows Its bouncebackability : McGeever

By Jamie McGeever


ORLANDO, Florida, Feb 5 (Reuters) - "Bouncebackability."


This Britishism is typically associated with cliche-prone soccer managers trumpeting their groups' capability to respond to beat. It's unlikely to find its method across the pond into the Wall Street crowd's lexicon, but it perfectly summarizes the U.S. stock market's strength to all the obstacles, shocks and everything else that's been thrown at it recently.


And there have actually been a lot: U.S. President Donald Trump's tariff flip-flops, appraisals, extreme concentration in Big Tech and the DeepSeek-led turmoil that just recently called into question America's "exceptionalism" in the international AI arms race.


Any one of those concerns still has the possible to snowball, triggering an avalanche of offering that might press U.S. equities into a correction or perhaps bear-market territory.


But Wall Street has become remarkably durable considering that the 2022 rout, specifically in the last 6 months.


Just take a look at the synthetic intelligence-fueled chaos on Jan. 27, spurred by Chinese startup DeepSeek's discovery that it had developed a big language design that could attain comparable or better outcomes than U.S.-developed LLMs at a fraction of the cost. By numerous procedures, the market move was seismic.


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


Drilling deeper, experts at JPMorgan discovered that the thrashing in "long momentum" - essentially buying stocks that have actually been performing well recently, such as tech and AI shares - was a near "7 sigma" move, or seven times the standard variance. It was the third-largest fall in 40 years for wavedream.wiki this trading strategy.


But this legendary relocation didn't crash the market. Rotation into other sectors accelerated, and around 70% of S&P 500-listed stocks ended the day higher, implying the broader index fell only 1.45%. And buyers of tech stocks quickly returned.


U.S. equity funds attracted nearly $24 billion of inflows recently, innovation fund inflows struck a 16-week high, and momentum funds attracted positive circulations for a fifth-consecutive week, according to EPFR, 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 ... recommend 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 unexpected bounce from a 33-year low against the dollar stimulated worries that financiers would be forced to sell possessions in other markets and nations to cover losses in their big yen-funded carry trades.


The yen's rally was extreme, on par with previous monetary crises, and the Nikkei's 12% fall on Aug. 5 was the biggest one-day drop given that October 1987 and annunciogratis.net 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 recouped its losses within 2 weeks, and the Nikkei did likewise within a month.


So Wall Street has passed two big tests in the last 6 months, a period that consisted of the U.S. governmental election and Trump's return to the White House.


What explains the durability? There's nobody obvious answer. Investors are broadly bullish about Trump's financial agenda, the Fed still appears to be in alleviating mode (for now), the AI craze and U.S. exceptionalism narratives are still in play, and liquidity is plentiful.


Perhaps one key motorist is a well-worn one: the Fed put. Investors - many of whom have invested a good piece of their working lives in the era of extraordinarily loose financial policy - may still feel that, if it actually comes down to it, the Fed will have their backs.


There will be more pullbacks, and threats of a more prolonged decline do seem to be growing. But for now, the rebounds keep coming. That's bouncebackability.


(The viewpoints revealed here are those of the author, a columnist for Reuters.)


(By Jamie McGeever; Editing by Rod Nickel)