Broker Check
February 2022 Monthly Outlook -  Dead Cat Bounce or Time to Pounce?

February 2022 Monthly Outlook - Dead Cat Bounce or Time to Pounce?

February 01, 2022

January was the worst month in the financial markets since March 2020. Interest rates (10 yr US Treasury) spiked on inflation fears.  This led to a major sell off in stocks, especially tech stocks.  We experienced the first correction (decline of 10%) in almost 2 years.  Volatility was off the charts with moves of 1% or more (plus or minus) on half of the days during the month.

The stock market made an impressive rebound the last 2 days of the month, mostly due to how oversold it had gotten and positive corporate earnings from Apple.  The question now is whether the recent rebound is just a dead cat bounce or a time to pounce and put more money to work.

  • A dead cat bounce is an investing term for the temporary rise in the price of a stock or other asset during a long period of decline. The morbid term comes from the idea that if it falls far enough, even a dead cat will bounce. The "bounce" is the short-term price increase that is preceded and followed by decline. Technically speaking, a dead cat bounce can only be identified after it happens.

The chart below shows the steep decline in the S&P 500 during January and the rebound attempt at the the end of the month.  The question now is can the market stay above the red line (~4,450 on the S&P 500).

We will likely get a sense of direction by the end of this week as several large, important market bellweather companies are reporting their earnings this week.  That includes Google, Amazon, Facebook and Exxon.


Our sense is that the factors that led to the January decline (higher inflation and interest rates, slowing economic activity due to Omicron) remain and that the recent rebound will lose steam and the market likely has another decline in the near future.  However, we remain responsive to how the market shifts.

I thought this cartoon very appropriate to what the market is experiencing right now.


We hope this report is informative.  Feel free to share it with anyone you feel it would benefit.

February Calendar of Events   (comments and additions for future months are always welcome)

  • February is Black History Month.  Let’s all strive for understanding and acceptance for people of all colors, nationality, and religions.


February  2nd                   Groundhog Day –  praying he doesn’t see his shadow – I’m tired of winter

February 7th                    Super Bowl Sunday – please watch safely (masks and social distancing)

February 14th                  Valentine’s Day   

February 21st                  Presidents Day


Best regards,




Sources: Day Hagan Asset Management, Motley Fool


Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful.  Past performance is no assurance of future results.

Please consider the charges, risks, expenses and investment objectives carefully before investing. Please see a prospectus containing this and other information. Read it carefully before you invest or send money.

Information provided should not be construed as legal or tax advice.  You should discuss any tax or legal matter with the appropriate professional.