Dead cat bounce

Even a dead cat bounces if it falls from high enough. First coined by Financial Times journalists back in 1985 (and resurrected many times since), this slightly gruesome metaphor for a technical rebound with no future might just be relevant again.

By raising its key rates for the first time since 2023, the Fed just confirmed that markets have entered a more restrictive monetary cycle. Ninety percent of traders saw it coming, but that didn’t stop the Dow Jones from shedding 1,000 points in 90 minutes.

A brutal drop, contested the very next day by a rally in full swing.

The optimists read the sharp rebound as a return to the uptrend, but it looks an awful lot like a technical bounce.

For one, the panic never really showed up. The rate hike was widely priced in, and market players had time to take cover and hedge against the risk.

And for another, the next day’s spike (largely fueled by traders unwinding those hedges) hasn’t found anything to carry it forward.

The one consolation: this rate hike seems to have forced Donald Trump to face his responsibilities. If the inflationary backdrop no longer lets even Kevin Warsh, his protégé, guarantee accommodative conditions, then getting out of the Iranian quagmire is now urgent.

Scheduled for this Thursday in Washington, the meeting between Donald Trump and Xi Jinping puts artificial intelligence on the front page, but behind the scenes, the Iranian conflict will sit at the heart of the talks, with both powers keen to end the energy disruptions.