GitLab

By Jamie McGeever

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

This Britishism is usually connected with 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 completely summarizes the U.S. stock exchange'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, severe concentration in Big Tech and the DeepSeek-led turmoil that recently cast doubt on America's "exceptionalism" in the worldwide AI arms race.

Any among those problems still has the potential to snowball, causing an avalanche of selling that could push U.S. equities into a correction and hb9lc.org even bear-market area.

But Wall Street has actually ended up being extremely resistant given that the 2022 thrashing, especially in the last six months.

Just take a look at the synthetic intelligence-fueled chaos on Jan. 27, spurred by Chinese startup DeepSeek's revelation that it had established a big language model that could attain similar or better results than U.S.-developed LLMs at a fraction of the expense. By lots of 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 deeper, analysts at JPMorgan found that the thrashing in "long momentum" - basically buying stocks that have actually been carrying out well 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 method.

But this epic relocation didn't crash the market. Rotation into other sectors accelerated, and mariskamast.net around 70% of S&P 500-listed stocks ended the day higher, meaning the wider index fell just 1.45%. And buyers of tech stocks soon returned.

U.S. equity funds brought in nearly $24 billion of inflows last week, innovation fund inflows struck a 16-week high, and momentum funds attracted positive flows for a week, according to EPFR, the fund flows tracking company.

"Investors saw the DeepSeek-triggered selloff as a chance rather than an off-ramp," EPFR director of research Cameron Brandt composed on Monday. "Fund streams ... suggest 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 unexpected bounce from a 33-year low against the dollar triggered worries that investors would be required to offer possessions in other markets and nations to cover losses in their substantial yen-funded bring trades.

The yen's rally was severe, on par with past financial crises, and the Nikkei's 12% fall on Aug. 5 was the most significant one-day drop since 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 recovered its losses within two weeks, bybio.co and biolink.palcurr.com the Nikkei did likewise within a month.

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

What explains the strength? There's nobody obvious answer. Investors are broadly bullish about Trump's financial agenda, the Fed still appears to be in reducing mode (in the meantime), the AI frenzy and U.S. exceptionalism narratives are still in play, and liquidity abounds.

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

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

(By Jamie McGeever; Editing by Rod Nickel)