News & Politics

On Brexit: What Exactly Is a Dead Cat Bounce?

As you almost certainly already know because you are a person in the world, the United Kingdom voted last night to leave the European Union. And while the exit won’t follow immediately—there’s a complex legal process to be undertaken—markets do respond immediately.

After a devastating period which saw the pound’s exchange rate fall to lows not seen since the 1980s, things have started to look a bit brighter. But don’t expect the rebound to last. That period of modest recovery has a gruesome name in the finance world: Dead Cat Bounce.

If you’ve been watching a television or reading a newspaper or listening to the radio, you’ve probably heard the words (but perhaps not heard them explained). Some examples:

This colorful term of hazy origin is used to distinguish a brief recovery from an actual rally.

“Dead cat bounce refers to  people claiming success for a non-event–or even for an event that should disprove the story they’re telling,” says Nick Buffie, a research assistant at the Center for Economic and Policy Research. “The idea is that if you drop a live cat from a certain height, it will land on its feet—as cats always do—and jump back up. By contrast, if you dropped a dead cat, its body would bounce slightly after hitting the ground, but then it would just fall back to the ground again.”
Translation: Despite the bounce, expect the pound to continue to fall.
Contributing Editor

Amanda has contributed to Washingtonian since 2016. She has written about the right-wing media personality Britt McHenry, chronicled her night with Stormy Daniels, and come clean about owning too much stuff. She lives on H Street. She can be reached at [email protected]