Short Sellers Are Giving Up Amid COVID Bull Market: Bloomberg

It’s not just Tesla Inc (NASDAQ: TSLA) skeptics who have been hit hard this year, as Benzinga noted yesterday. Short sellers in general have had such a terrible go of it that many have given up.

That’s according to a Bloomberg report today: “So harrowing has it been that bears are giving up. At the end of October, the median S&P 500 stock had outstanding short interest accounting for just 1.6% of market capitalization, the lowest level since at least 2004, data compiled by Goldman Sachs show.”

What Happened: The historic bull run of 2020 has defied headlines that in the past would have tanked markets. Nws of pandemic-related unemployment and business closures has been beaten back by unprecedented U.S. Federal Reserve intervention in the markets.

And then there’s the other twist: A new generation of traders has poured money into no-commission platforms, led by the pioneering Robinhood.

The Dow Jones Industrial Average, Nasdaq and S&P 500 have each hit all-time highs this year. Even the Russell 2000 index of small cap stocks “is headed toward its best month in two decades,” Bloomberg reported.

“Traders betting on a slide absorbed a $163 billion loss in November, adding to an already maddening year.

“This is how it’s been throughout 2020. Punishment has been swift for almost any skeptical instinct. Views that seem logical on their face — that the election would sow pain, that a recession would kill the rally — immediately became money-losers.”

Why It Matters: Short-sellers, especially those who dared bet against tech, are getting pummeled. 

“This month through Wednesday, investors betting on a fall in the S&P 500 were down $163 billion in mark-to-market losses as the index gained about 9%,” Bloomberg reported, using data from S3 Partners.

Disclosure: The author of this Benzinga story owns shares of inverse, or “short,” ETFs that rise in value when indices (including the Dow, S&P 500 and Nasdaq) or sectors (including tech) fall.


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© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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