Dead Cat Bounce

Dead Cat Bounce refers to a temporary recovery in the price of a declining Asset, often followed by a further decline. The term suggests that even a dead cat will bounce if it falls from a great height, implying that any brief uptick in a market experiencing a downturn is often short-lived.

For example, if a Stock that has been in a steady decline suddenly rises 5% over a few days, investors might interpret this as a “dead cat bounce” if the Stock then resumes its downward trend.

One notable case occurred during the 2008 financial crisis when many Stocks experienced sharp, brief recoveries amidst a broader market collapse. For instance, Shares of major banks saw short-term gains after hitting significant lows, but these gains were not sustained as the economic downturn continued.