Short bets against US stocks have fallen to the lowest level since records began as the market’s seemingly endless rally continues

Stock MarketREUTERS

  • Short-seller interest has fallen to more than a 10-year low, the Financial Times reported, citing Goldman Sachs’ data.
  • Short-interest as a proportion of market capitalization for median stock in the S&P 500 hit 1.8% at the start of the year compared to an average of 2.4% for the last 15 years. 
  • Short positions recorded gains of $375 billion between February and March when markets tanked. 
  • But mark-to-market losses on short positions hit $383.5 billion since March lows according to S3 partners. 
  • Visit Business Insider’s homepage for more stories.

Short-selling in US stocks has hit the lowest level since records began, as the market’s near-constant upward trajectory in recent months pushes investors away from betting on stocks falling. 

This is according to data from Goldman Sachs cited by the Financial Times on Sunday. Short-interest as a proportion of market capitalisation for median stock in the S&P 500 hit 1.8% at the start of August, the FT said.

Short-interest by comparison was 2% at the start of the year, and has averaged roughly 2.4% over the past 15 years.

The US banking giant began tracking short-interest in 2004, and the figures are lowest since it began records, the FT said.

The S&P 500 hit a low of 2237.40 in March when coronavirus lockdowns began to kick in in the Western world. But the index soared in value in recent months. The S&P 500 is up 52% since March

Read more: President Trump will officially be nominated for a 2nd term this week. RBC says buy these 48 stocks spanning every industry that are poised to crush the market if he wins reelection.

Central banks rolled out generous stimulus relief packages worth trillions of dollars and investors are betting that a coronavirus vaccine will arrive soon, both of which have boosted stocks.

Short positions increased by about $375 billion between February and March, according to S3 Partners. 

Mark-to-market losses on short positions now total $383.5 billion since March’s lows. 

Stocks with the most amount of short-interest have performed better than the ones with the least amount of interest, the FT said, citing data from IHS Markit.

Short-sellers betting against a number of tech stocks have faced even steeper losses. 

Read more: Stocks are making their most extreme moves in 20 years — and one quant expert warns the COVID-19 crash was a preview of more ‘wild swings’ to come

Investors that bet against Amazon have suffered losses of $4.6 trillion as the stock is up 78% since the start of the year. 

Tesla has been one of the biggest darling’s of stock markets having rallied about 380% since March alone. 

But not all short-selling activity is subdued. 

Famed short-seller Andrew Left told Business Insider he is aggressively shorting a “crazy stupid” Chinese stock GSX Techedu that has gained more than 320% on the New York Stock exchange in 2020, as he believes it has exaggerated its earnings and will eventually be delisted.

Billionaire short-seller Jim Chanos has reportedly made almost $100 million by betting against the controversial German fintech Wirecard, which collapsed in June following allegations of a $2 billion accounting scandal. 

source.



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