Dead cat bounce

Q From Steven Gruzd, South Africa: I had never heard the phrase dead cat bounce before the recent dips and dives on the world’s stock markets, and then heard it three times in one day, on various media reports. Presumably it refers to a small improvement in the market’s fortune, after a long downward movement — even a dead cat dropped from a dizzy height may bounce a little. Am I correct? And what is its origin?

A It does indeed refer to a temporary recovery from a big drop in a stock’s price and the image evoked is just the one you give. The term is part of the extraordinary jargon of the financial world; the evidence strongly suggests that it originated on Wall Street. A good example of the usage is this from 1995: “The nature of that rally is going to be extremely important, because if it’s just a dead cat bounce, then I would say we were in for real trouble”.

Despite its obvious US origins, its first recorded appearance is in a report from the Far East in the issue of the Financial Times of London for 7 December 1985. It turned up again the following year in a piece written by a staff reporter on the Associated Press that spells out its origins and which has been widely quoted since:

One of the most vivid, if a bit indelicate, word pictures painted by the bears on oil comes from Raymond F. DeVoe Jr. at the investment firm of Legg Mason Wood Walker. DeVoe suggests the printing of a bumper sticker reading: “Beware the Dead Cat Bounce.” “This applies to stocks or commodities that have gone into free-fall descent and then rallied briefly,” he says. “If you threw a dead cat off a 50-story building, it might bounce when it hit the sidewalk. But don’t confuse that bounce with renewed life. It is still a dead cat.”

San Jose Mercury News, 28 April 1986.

The phrase gradually caught on during the 1990s but became very common during the financial downturn after 2000. Usage slackened off somewhat for a few years but the expression was revived during the world financial turmoil of 2008 onwards.

Glimmer of recovery or a dead-cat bounce? Confidence in economic prospects has picked up slightly among chief financial officers around the world — although pessimists still far outnumber optimists.

Economist, 16 March 2009.

The phrase Beware the dead cat bounce from the 1986 story was a popular headline in the financial pages in early 2009.