Stock Market and Dead Cats Bouncing
Published / Last Updated on 27/03/2020
‘Dead cats bouncing" - please forgive the terminology in this terrible time or if you are a cat lover. It is an industry term used for markets spiking upwards but temporarily and perhaps falsely, with further markets falls possible i.e. a dead market that will flop. In the credit crunch crisis of 2008, markets spiked upwards to record 6 of the top 10 highest daily increases in the FTSE 100 index in history. Despite those bounces, FTSE did not hit its low until March 2009.
This week, following huge rescue packages in the UK, Europe and around the globe and in particular an 'eyewatering' $2 trillion package approved by the US congress. This caused an all time record spike in US markets and the second highest spike of all time in the FTSE 100 index. Beware 'bouncing cats'.
1 spike so far in 2020 – 9%+
6 spikes in 2008 but only then hit low in March 2009 - credit crunch
1 spike in March 2003 SARS – finally got a vaccine in Summer
1 spike in April 1992 just until Sept Black Wendesday – ERM Exchange Rate Mechanism - The Conservative government was forced to withdraw the pound sterling from the European Exchange Rate Mechanism (ERM) after they were unable to keep sterling above its agreed lower limit.
1 in December 1987 Black Monday was October 87 – spike was after event but took a few months to start to recover.
