The recent increase in stock prices is just a dead cat bounce, according to one observer
A financial expert has indicated that the current bounce in stock markets is not likely to last long - because it is "based on nothing, aside from empty chatter".
Writing for Bloomberg, financial expert David Reilly compared the recent rise of the markets to popular sitcom Seinfeld - which was famously described by its creators as the "show about nothing". The new analysis pointed out that many of the current economic indicators such as unemployment rates and house prices, improvements in which generally cause stocks to rise, were showing little sign of recovery at the moment.
Key US index the S&P 500 has risen by around 14 per cent over the past week and a half, reflecting increases in markets around the world, including that of the FTSE 100 in London. The recent announcement from Vikram Pandit, head of Citigroup, that the bank returned to profitability in January and February, along with positive comments on stock prices from US president Barack Obama, could have played a factor in this trend.
However, Mr Reilly said that investors should be "on guard" and added that he did not expect the bounce to last. "While hot air got markets off the ground, it isn't enough to sustain them… the economy still looks lousy," he said.
This chimes with sentiments expressed by other analysts, including Nouriel Roubini, the New York-based economist who predicted the onset of the credit crunch before it occurred and is widely known as "Dr Doom" for his consistently gloomy predictions on financial matters. With typical bluntness, he recently described the stock movements as a "sucker's rally" and advised investors not to buy shares for the long term.
A baseless bear market rise in stocks which is soon cancelled out by fresh falls in share prices is also widely known among traders as a "dead cat bounce".
