2023-06-30 20:43:00
• Short sellers bet once morest US stock market at highest level since April 2022
• Skepticism regarding continuation of market rally
• Fed might crash the stock market party
Total short interest in the US surpassed $1 trillion last Friday, Markets Insider reports, citing data from S3 Partners. Specifically, bets once morest the US stock market were last seen at $1.02 trillion, the highest since April 2022.
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Betting once morest the bull market
This positions short sellers for a potential downtrend in the market following US stock markets have performed strongly so far this year.
The S&P 500 is up 14.00 percent year-to-date and has recently exited bear market territory and entered a bull market. The tech index Nasdaq Composite also has a strong tailwind in 2023 and has gained a whopping 29.86 percent over the course of the year so far, while the blue-chip index Dow Jones has achieved a comparatively meager annual increase of 2.13 percent so far (as of closing prices on June 28, 2023).
Tech giants as top shorts
In line with this development, it is hardly surprising that well-performing tech stocks are among the top short positions in the market: S3 Partners names the mega-cap tech stocks Tesla, Apple, Microsoft, NVIDIA and Amazon as the most shorted stocks on the market US stock market – as of Friday before last, short interest in these stocks is said to have totaled 83 billion US dollars.
Will the Fed stop the bull market?
Apparently, investors are not very optimistic that the market rally will continue. The markets had already suffered a setback a few days ago when the US Federal Reserve took an interest rate pause, but at the same time announced two further interest rate hikes for 2023. Fed Chair Jerome Powell supported this fear last Thursday and stated that a large majority in the central bank’s FOMC, which is responsible for interest rate policy, sees it as appropriate to raise interest rates further this year: “Maybe even twice”, he added. There is still “a long way to go” until the goal of an inflation rate of 2.0 percent is reached.
This had brought recession worries back to the market, especially as not all experts are assuming that the US economy can still manage a soft landing following ten interest rate hikes in a row.
AI as course driver
Against this background, the optimism in the stock markets should also increasingly fade, which explains the increase in short bets once morest them. In any case, many observers do not see a rally on the broader market, although prices have risen significantly over the course of the year to date. However, the upswing was primarily supported by tech stocks, especially those that play a key role in the future field of artificial intelligence.
However, if the mood on the market remains positive despite all the headwinds, it might be the short sellers in particular that will ensure a further upward trend. If their bets on price declines don’t work out, they are forced to stock up on stocks to avoid additional losses. In this respect, the current short interest should be a sign of the current mood on the floor, but this is not a clear indication of the development on the stock markets.
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