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

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

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. 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.