By now you have probably heard about the term “dead cat bounce”, but for those who don’t, here is a basic definition…it’s a fool’s rally. However, if you prefer a more elaborate definition, click here for the Wikipedia answer. Chances are that if you are watching the markets like I do, you can see dead cat bounces happening in virtually all markets, stocks, bonds, real estate, etc.
How can that be?
It’s all about the fundamentals folks. Look at our economy, it sucks plain and simple. I know I am not supposed to say that, but reality is reality. Are we in a recession? Is inflation out of control? Is Big Ben going to save us? Will Britney Spears ever get a life?
All good questions that really don’t matter. I know you are thinking I am nuts, but these are just terms to describe the fundamentals. Look at the data and not focus on “words”. The data substantiates arguments about us being in a recession. It also justifies arguments that inflation is out of the “comfort zone”, though it is stabilizing(?). Earnings reports are missing their marks…Jobs data shows unemployment issues and the ISM Services Index shows the economy contracting like a scared little girl.
So, as data hits the airwaves, stocks plummet and bonds rally, followed by more data (or a Fed move) that reverses the trend. Oil spikes, then drops. Fear has gripped the marketplace folks and that means that the mini rallies in any market are likely unsubstantiated (hence the term dead cat bounce). So, we see a bounce here, a bounce there, everywhere a bounce, bounce, non of which will “stick” and get the markets back on their feet.
So where are the markets going to head? That depends, but one thing is for sure, until the market fears subside, any direction is fair game.