Before the bell: Are We Seeing a Dead Cat Bounce?

After the best trading day of the year in the United States, the stock market rally continues. The question remains whether this is a sustainable recovery or a so-called ‘dead cat bounce.’

“If you throw a cat from the fiftieth floor, it will still make a small bounce on the pavement. Don’t mistake that for a sign of renewed life.” With these words, Raymond F. DeVoe explained the idea behind a ‘dead cat bounce.’ This concept is also used in stock markets when a stock has experienced a sharp decline. After last week’s best trading day of 2025, the question is whether we are witnessing a ‘dead cat bounce’ in the U.S. Yesterday, the Dow Jones Index closed 0.9% higher. In Hong Kong, the Hang Seng Index rose by 2.1% this morning. A notable mover was Chinese automaker BYD (+4%), which announced that its car batteries can now be charged in just five minutes.

It remains to be seen how the market will react to German insurer Allianz. The company is selling its two joint ventures in India to the Bajaj Group for 2.6 billion euros. Meanwhile, Google parent company Alphabet is reportedly looking to acquire cybersecurity firm Wiz for 30 billion dollars. The deal already fell through once this summer, but according to The Wall Street Journal, Alphabet is unwilling to give up. Belgian telecom provider Proximus is reportedly searching for two new managers to replace CEO Guillaume Boutin, according to De Tijd. Today, we also expect data on investor sentiment from Germany and U.S. building permits.

Avoid Illiquid Stocks

Some publicly traded companies occasionally appear in the media but should be approached with caution. Belgian coffee supplier Fountain is one such example. Not that we have anything against Belgian companies or coffee producers—Fountain’s earnings report yesterday was actually quite encouraging. The company, which not long ago was on the brink of collapse, saw its EBITDA grow by 37%, while net profit increased by 53%. Net debt was reduced to 6.3 million euros, bringing it to less than twice the EBITDA, making the company financially stable again. After such positive news, you might be tempted to buy the stock. However, we advise against it. These reports often overlook the fact that there is little to no liquidity in the stock. You may be able to buy shares, but if you want to sell, it can take weeks or even months. For example, yesterday, there were only 800 euros worth of Fountain shares traded throughout the entire day. Our advice: don’t just look at a company’s fundamentals—also consider market capitalization and trading volume. It’s best to steer clear of micro-cap stocks.

Avoid Going into the Red

Free money doesn’t exist—unless you know Klarna. This Swedish fintech company is best known for allowing small purchases on credit. The first 30 days are interest-free, making it extremely popular among younger consumers. However, if you forget to pay, costs quickly escalate. A 12-euro purchase can easily rack up an additional 7 euros in late fees after the second reminder. Competitors like Affirm (-4.3%) are watching with concern. Not only is Klarna preparing for an IPO, but as of yesterday, it also became Walmart’s (+2.5%) preferred financing partner. Buy-now-pay-later options are likely to grow even more popular. The bill will come later.

Did You Know…

that the Greek government is now considered a reliable creditor again? For the first time in 15 years, credit rating agencies Fitch, Standard & Poor’s, and Moody’s have upgraded Greece’s credit rating to investment grade. The last time this happened was before the euro crisis.

This article was translated from Dutch and was originally published on Spaarvarkens.be.