Wall Street Shows Its bouncebackability : McGeever

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By Jamie McGeever


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


This Britishism is generally related to cliche-prone soccer managers trumpeting their teams' ability to react to beat. It's unlikely to find its method throughout the pond into the Wall Street crowd's lexicon, but it perfectly summarizes the U.S. stock market's resilience to all the problems, shocks and whatever else that's been thrown at it 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 chaos that just recently called into question America's "exceptionalism" in the worldwide AI arms race.


Any among those concerns still has the possible to snowball, causing an avalanche of selling that could push U.S. equities into a correction or even bear-market territory.


But Wall Street has actually become extremely resilient given that the 2022 thrashing, especially in the last six months.


Just take a look at the artificial intelligence-fueled turmoil on Jan. 27, stimulated by Chinese start-up DeepSeek's discovery that it had actually established a large language model that might attain similar or much better outcomes than U.S.-developed LLMs at a fraction of the expense. By many measures, the marketplace move was seismic.


Nvidia shares fell 17%, slicing almost $600 billion off the firm's market cap, the greatest one-day loss for any business ever. The worth of the wider 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" move, or seven times the basic discrepancy. 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 greater, indicating the more comprehensive index fell only 1.45%. And buyers of tech stocks soon returned.


U.S. equity funds brought in nearly $24 billion of inflows last week, technology fund inflows struck a 16-week high, and momentum funds brought in favorable flows for a fifth-consecutive week, according to EPFR, library.kemu.ac.ke the fund flows tracking company.


"Investors saw the DeepSeek-triggered selloff as an opportunity instead of an off-ramp," EPFR director of research Cameron Brandt composed on Monday. "Fund streams ... recommend that much 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 sudden bounce from a 33-year low against the dollar stimulated fears that investors would be required to sell assets in other markets and countries to cover losses in their big yen-funded bring trades.


The yen's rally was severe, on par with past monetary crises, and the Nikkei's 12% fall on Aug. 5 was the most significant one-day drop because 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 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 huge tests in the last six months, a period that consisted of the U.S. governmental election and Trump's go back to the White House.


What explains the strength? There's no one apparent answer. Investors are broadly bullish about Trump's economic agenda, the Fed still seems to be in relieving mode (for now), the AI frenzy and classihub.in U.S. exceptionalism narratives are still in play, and liquidity is abundant.


Perhaps one key driver is a well-worn one: the Fed put. Investors - a number of whom have spent a great of their working lives in the period of extremely loose monetary policy - may still feel that, if it truly comes down to it, the Fed will have their backs.


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


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


(By Jamie McGeever; Editing by Rod Nickel)

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