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1 Wall Street Shows Its 'bouncebackability': McGeever

By Jamie McGeever

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

This Britishism is normally associated with cliche-prone soccer supervisors trumpeting their teams' capability to react to defeat. It's not likely to discover its way across the pond into the Wall Street crowd's lexicon, however it perfectly summarizes 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 actually been a lot: bybio.co U.S. President Donald Trump's tariff flip-flops, extended appraisals, extreme concentration in Big Tech and the DeepSeek-led chaos that just recently cast doubt on America's "exceptionalism" in the international AI arms race.

Any among those concerns still has the prospective to snowball, morphomics.science triggering an avalanche of selling that could push U.S. equities into a correction and even bear-market area.

But Wall Street has actually ended up being remarkably resilient because the 2022 thrashing, particularly in the last 6 months.

Just take a look at the synthetic intelligence-fueled chaos on Jan. 27, stimulated by Chinese start-up DeepSeek's discovery that it had established a big language model that could attain comparable or better results than U.S.-developed LLMs at a portion of the expense. By lots of steps, the marketplace relocation was seismic.

Nvidia shares fell 17%, slicing nearly $600 billion off the firm's market cap, the most significant one-day loss for any business ever. The value of the wider U.S. stock exchange 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 carrying out well just recently, such as tech and AI shares - was a near "7 sigma" relocation, or 7 times the standard variance. It was the third-largest fall in 40 years for this trading technique.

But this legendary move didn't crash the marketplace. Rotation into other sectors accelerated, and around 70% of S&P 500-listed stocks ended the day greater, implying the wider index fell just 1.45%. And buyers of tech stocks quickly returned.

U.S. equity funds attracted nearly $24 billion of inflows recently, technology fund inflows hit a 16-week high, and momentum funds attracted positive circulations for a fifth-consecutive week, according to EPFR, the fund flows tracking firm.

"Investors saw the DeepSeek-triggered selloff as a chance instead of an off-ramp," EPFR director of research Cameron Brandt wrote on Monday. "Fund flows ... recommend that many 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 that investors would be required to sell properties in other markets and countries to cover losses in their substantial yen-funded bring trades.

The yen's rally was severe, on par with previous financial crises, and the Nikkei's 12% fall on Aug. 5 was the biggest 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 disappeared quickly. The S&P 500 recovered its losses within two weeks, and the Nikkei did also within a month.

So Wall Street has actually passed 2 big tests in the last six months, a duration that included the U.S. presidential election and Trump's go back to the White House.

What explains the durability? There's no one apparent response. Investors are broadly bullish about Trump's economic agenda, the Fed still seems to be in easing mode (in the meantime), the AI frenzy and U.S. exceptionalism stories are still in play, and liquidity abounds.

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

There will be more pullbacks, and dangers of a more extended slump 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