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Bets Against $357 Billion S&P 500 ETF Jump to Highest This Year

Bloomberg2021-05-26

  • Short interest in SPY has been steadily rising for two weeks
  • S&P 500 has been fluctuating not far from its all-time high

Investors are increasing wagers against the S&P 500 by shorting the world’s biggest exchange-traded fund.

With the benchmark U.S. equity gauge oscillating near its all-time high, short interest in the $357 billion SPDR S&P 500 ETF Trust (tickerSPY) has jumped to the highest this year, according to IHS Markit Ltd. data.

About 4.8% of the fund’s shares are now out on loan, the data show. That compares with 2% less than two months ago and 1.7% at the start of the year.

While the measure remains well below highs of the last two years -- it rose above 7% more than once in 2020 -- the bearish turn comes at a fragile time in markets.

“The surging short interest in the S&P 500 is in part due to skepticism that the rally can continue or at least that we are due for a pullback,” said Chris Zaccarelli, chief investment officer at IndependentAdvisorAlliance. “We don’t think the bull market is in any danger of ending prematurely. But with a 10% or greater pullback happening on average once every two years (at least since 1980), we do believe a pullback of that magnitude is likely this year.”

Investors have been rotating to stocks more exposed to the economic cycle, but episodes of volatility have hit as they also fear faster inflation and the prospect of higher interest rates. Meanwhile, drama in the most speculative parts of the market like cryptocurrencies have fueled worries that sentiment is stretched too far on the bullish side.

Indicators at Citigroup are still in “euphoria territory,” strategists led by Tobias Levkovich said in a report Friday. That’s generating a “100% historical probability of down markets in the next 12 months at current levels,” they wrote.

Meanwhile, Chris Murphy, co-head of derivatives strategy at Susquehanna International Group,notedon Tuesday that real dividend yield and real earnings yield for the S&P 500 have both recently turned negative.

“This is a pretty rare occurrence, and in general does not bode well for SPX returns both in the near term (when SPX dividend yield turns negative) and in the longer term (when SPX earnings yield turns negative),” he wrote.

However, the Susquehanna team said they expect any pullbacks to be short-lived. They alsonotedthat short interest in U.S. stocks remains low by historical standards.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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Comment15

  • Sherily
    ·2021-05-26
    Like and comment thanks 
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  • Hunter88
    ·2021-05-26
    Excellent year 
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  • BBBBBBBBBB
    ·2021-05-26
    Like and comment pls 
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    • Sherily
      Okay
      2021-05-26
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  • Vernonsoh
    ·2021-05-26
    Like and comment
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    • Huathk
      K
      2021-05-26
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    • Azelia
      reply back? :)
      2021-05-26
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  • e13v3n
    ·2021-05-26
    pls like n comment. waiting for michael burry to reveal his shorts
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    • Azelia
      ok
      2021-05-27
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    • e13v3n
      reply
      2021-05-27
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    • Azelia
      reply back pls?
      2021-05-26
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  • yyhwin
    ·2021-05-26
    Like and comment please
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    • Azelia
      oki
      2021-05-26
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    • Onglie
      comment back pls
      2021-05-26
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  • BallQoo
    ·2021-05-26
    Like
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    • voluble
      ok
      2021-05-26
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    • yyhwin
      Comment back please
      2021-05-26
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    • BallQoo
      [微笑]
      2021-05-26
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  • yyhwin
    ·2021-05-26
    Long for the win?
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    • Charlie89
      But the article mentioned that investors are shorting S&P500, so it is still worth longing it? Or better to observe first before deciding.
      2021-05-26
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    • Ky1
      Let them short, i going to long at lower
      2021-05-26
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    • Mr小白
      yup
      2021-05-26
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  • LennartM
    ·2021-05-26
    like and comment ty
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    • Huathk
      K
      2021-05-26
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    • yyhwin
      Comment back please
      2021-05-26
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  • voluble
    ·2021-05-26
    Comment
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    • voluble
      ok
      2021-05-26
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    • BallQoo
      reply
      2021-05-26
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  • Seward
    ·2021-05-26
    Great 
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    • zeeling
      Cool
      2021-05-26
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  • AndyQuak
    ·2021-05-26
    666
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  • Kiattt
    ·2021-05-26
    Ok. Pls like and comment. Ty 
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    • Huathk
      K
      2021-05-26
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    • Roi90
      Done pls comment back
      2021-05-26
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  • IamBolt
    ·2021-05-26
    Like comment
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    • Vernonsoh
      wow
      2021-05-26
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    • Kiattt
      Done. Pls reply to comment. Ty
      2021-05-26
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    • Seward
      Great
      2021-05-26
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  • zeeling
    ·2021-05-26
    Cool
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    • Seward
      Great
      2021-05-26
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