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1 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' ability to react to defeat. It's not likely to find its method throughout the pond into the Wall Street crowd's lexicon, but it completely summarizes the U.S. stock market's resilience 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 chaos that just recently called into question America's "exceptionalism" in the global AI arms race.

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

But Wall Street has ended up being extremely durable considering that the 2022 rout, particularly in the last 6 months.

Just take a look at the artificial intelligence-fueled turmoil on Jan. 27, stimulated by Chinese startup DeepSeek's revelation that it had actually established a big language design that could attain similar or better outcomes than U.S.-developed LLMs at a portion of the cost. By many steps, 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 company ever. The value of the larger U.S. stock market fell by around $1 trillion.

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

But this impressive 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, meaning the broader index fell only 1.45%. And buyers of tech stocks soon returned.

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

"Investors saw the DeepSeek-triggered selloff as an opportunity rather than an off-ramp," EPFR director of research Cameron Brandt composed on Monday. "Fund flows ... recommend that much of those investors kept faith with their previous assumptions about AI."

PANIC MODE?

Remember "yenmageddon," the yen carry trade volatility of last August? The yen's unexpected bounce from a 33-year low against the dollar sparked worries that financiers would be required to offer possessions in other markets and countries to cover losses in their substantial 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 greatest 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 rapidly. The S&P 500 recouped its losses within 2 weeks, and the Nikkei did likewise within a month.

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

What explains the resilience? There's no one obvious response. Investors are broadly bullish about Trump's financial agenda, the Fed still appears to be in relieving mode (in the meantime), the AI craze and wiki.eqoarevival.com U.S. exceptionalism narratives are still in play, and liquidity is numerous.

Perhaps one essential chauffeur is a well-worn one: the Fed put. Investors - many of whom have spent a good chunk of their working lives in the period of extremely loose monetary policy - might 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 extended recession do appear to be growing. But for now, the keep coming. That's bouncebackability.

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

(By Jamie McGeever