By Jamie McGeever
ORLANDO, Florida, Feb 5 (Reuters) - "Bouncebackability."
This Britishism is normally associated with cliche-prone soccer managers trumpeting their groups' ability to react to beat. It's not likely to discover its way across the pond into the Wall Street crowd's lexicon, however it perfectly sums up the U.S. stock exchange's durability 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 that just recently cast doubt on America's "exceptionalism" in the global AI arms race.
Any one of those problems still has the prospective to snowball, causing an avalanche of offering that could push U.S. equities into a correction or even bear-market territory.
But Wall Street has actually become incredibly resistant 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 developed a big language model that could attain similar or much better outcomes than U.S.-developed LLMs at a fraction of the cost. By many steps, 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 broader U.S. stock market fell by around $1 trillion.
Drilling much deeper, experts at JPMorgan found that the rout in "long momentum" - basically buying stocks that have actually been performing well recently, such as tech and AI shares - was a near "7 sigma" relocation, or 7 times the basic variance. It was the third-largest fall in 40 years for this trading strategy.
But this epic relocation didn't crash the marketplace. Rotation into other sectors accelerated, and around 70% of S&P 500-listed stocks ended the day higher, suggesting the wider index fell only 1.45%. And buyers of tech stocks quickly returned.
U.S. equity funds drew in almost $24 billion of inflows recently, technology fund inflows hit a 16-week high, and momentum funds attracted favorable circulations for a fifth-consecutive week, akropolistravel.com 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 streams ... recommend that a lot of those financiers 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 financiers would be required to sell assets in other markets and nations to cover losses in their huge 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 most significant one-day drop considering 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 two weeks, and the Nikkei did also within a month.
So Wall Street has passed 2 big tests in the last 6 months, a duration that consisted of the U.S. presidential election and Trump's return to the White House.
What explains the durability? There's nobody apparent response. Investors are broadly bullish about Trump's economic agenda, the Fed still seems to be in alleviating mode (for now), the AI frenzy and U.S. exceptionalism narratives are still in play, and liquidity is plentiful.
Perhaps one crucial chauffeur is a well-worn one: the Fed put. Investors - much of whom have spent a good piece of their working lives in the period of extremely 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 prolonged downturn do seem 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
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Wall Street Shows Its 'bouncebackability': McGeever
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