Hedge funds have increased their Short Equity Futures positions by $25 billion, the largest increase in three weeks in over a decade. Total leverage has reached a historical high with a surge in ETF and single stock short positions.
Since April, the S&P 500 index has rebounded by 23%, but hedge funds are increasing their bearish bets on the stock market as investors doubt the sustainability of the tariff relief-driven rally.
Over the past three Commitments of Traders (COT) reports, hedge funds have increased their short stock futures exposure by $25 billion, marking the largest increase in three weeks in a decade.
Table of Contents
ToggleWall Street Analysts: Public Remains Skeptical of Short-Term Recovery from Tariff Sanctions Suspension
Goldman Sachs analyst Ben Snider stated that the total gross leverage, including long and short positions, has risen to a historical high. Although the net leverage (long minus short) remains below February levels, the accelerated growth of short positions has altered the market landscape. This surge highlights growing doubts about the market's resilience in a V-shaped recovery after tariff sell-offs.
Steno Research analyst Oskar Vårdal noted that as economic growth and inflation begin to accelerate again, hedge funds and Commodity Trading Advisors (CTAs) continue to counter the cycle, doubling down on long-term bonds and short-term risks.
Which Shorts Are Hedge Funds Targeting?
Hedge funds are targeting both ETFs and individual stocks. Goldman Sachs data shows that Q2 ETF short positions reached $218 billion, while single stock short positions hit $948 billion, with April seeing the largest growth in US ETF short selling.
Among US-listed ETFs, SPDR S&P Regional Banking ETF has seen short holdings surge by 50 percentage points since mid-February, now occupying 96% of floating shares. SPDR S&P Biotech ETF increased 27 points to 111%, and iShares Russell 2000 ETF rose to 33%.
The ETFs with the highest historical short positions include VanEck Gold Miners ETF at 12% of floating shares, First Trust NASDAQ-100 Tech ETF at 4%, and iShares Core S&P Mid-Cap ETF with $1 billion in short sales.
Wall Street's Interest in Consumer Staples Shorts Surges
Wall Street is showing interest in shorts for consumer staples, utilities, and healthcare sectors, which now occupy the top fifth. The median S&P 500 index short position represents 2.3% of market cap, with interest in financial and information technology sector shorts below long-term averages.
Which US Stocks Are the Most Bearish Targets?
The US stocks with the largest short position increases since the February peak include Somnigroup (NYSE: SGI), Lucid Group Inc (Nasdaq: LCID), Amer Sports Inc. (NYSE: AS), Medpace Holdings Inc (Nasdaq: MEDP), Moderna (Nasdaq: MRNA), and First Solar Inc. (Nasdaq: FSLR).
Pure market observation, not investment advice.
Risk Warning
Cryptocurrency investments carry high risk with potentially significant price volatility. You may lose your entire principal. Please carefully assess the risks.
