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The Big Take

Market Turmoil Is Ultimate Test of What’s Real and What’s Not

Ultra-speculative assets are leading the way down, but robust corporate balance sheets could put a floor under prices.

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Photographer: Shane Moore/Animals Animals

It’s been an ugly start to the year in the stock market, and many on Wall Street are bracing for it to get even uglier. On Jan. 25 the S&P 500 index was almost 10% below its last high, which was reached on the first trading day of 2022. The Nasdaq-100 index was off nearly 15% from its peak in November, while the Russell 2000 Index of smaller companies was down almost 18% from its latest high.

Market pundits seemed more shaken than those numbers alone would suggest, with talk of long winters and bursting bubbles even amid late-in-the-day rallies as traders tried to “buy the dip.” Perhaps that’s because there’s a sense that the markets are, for the first time in a while, going to have to grit out losses without help from an accommodating U.S. Federal Reserve. And while companies themselves are healthy—with strong balance sheets that could eventually help put a floor under equity losses—the long-reigning expectation that risky assets will mostly go up seems to have been broken.