The promotion of GameStop Corp. frightened anyone caught on the wrong side of climbing. But these bearish positions may not be big enough to lie low in the larger universe of investment funds.
That is the view of strategists Barclays Plc led by Maneesh Deshpande. By plotting the betting value of a bearish equity bet relative to the market capitalization as a whole, they found that short selling has declined in the past year to its lowest level since the year. -today 2008. In addition, the shortest-targeted companies by day traders this year had bearish wagers that are less than 0.001% of the $ 43 trillion market.
Whether the loss suffered by hedge funds and other cash pools was large enough to ignite a full-blown contagion was a concern that arose several times during last week’s sale – the worst in the S&P 500 from October. For now, while Reddit-fueled stocks may have drowned out all other reports, they are unlikely to fully enter the bull market.
“We are seeing an unprecedented amount of speculative activity. But on the other hand, we are talking about a very narrow group of stocks that has no outside influence, ”said Marshall Front, chief investment officer at Front Barnett Associates. “The fundamental foundations of the economy are strong. A very aggressive and appropriate policy with the Federal Reserve remains intact. Together, they help the stock market on the way up. ”
Burned by a brief sell-off, hedge funds have withdrawn money from the market at one of the fastest rates on record. The shortest stocks rallied 14% last week as a group, dealing the biggest blow to short sellers since last April, which Goldman Sachs Group Inc. basket displays.
While the S&P 500 fell more than 3% last week, traders described the broad market as an order. To the strategists of JPMorgan Chase & Co. featuring Dubravko Lakos-Bujas, the pullback appears to be a “short-term technical tumble. “With earnings improving and US consumers strengthening, this pullback is another opportunity to add to stocks, especially those aiming for economic recovery, the report wrote. techniques in Friday’s note.
To be sure, day traders are targeting bearish investor-preferred companies, trying to encourage sputtering. In 2021, the top high of the Russell 3000 stocks with the highest short selling as a percentage of their bog is up 20%, compared to a loss of 0.8% for the low 600, according to data compiled by Bloomberg. But these results are also consistent with a contour that was already emerging as investor risk appetite increased: gains in companies with darker finance, which had been going through the 2020 pandemic market.
“While the brief tightening began with GME, it appears to be spreading to a wider range of stocks,” Deshpande at Barclays wrote in a note on Friday, citing a GameStop ticker. “While we expect some further reductions, in the end the scale of the problem appears to be very limited. ”
Short Splitting
The more short sellers hate, the better to return this year
Source: Bloomberg
According to a Barclays report, short selling totaled $ 800 billion, or about 2% of the total market value of American shares, a sign that short sellers have not expanded themselves. The heavily shortened companies – those with interest accounting for more than 20% of their share – saw $ 40 billion of their stock sold short, or 5% of the total pool of betish bets.
“We’re still hopeful he’s likely to stay local,” Deshpande said. “The bottom line is that while the pain may continue in the short term, the risk of full-time infection is still low. ”
– Supported by Elena Popina