Hedge Fund Gross Leverage (borrowing cash to increase returns) hits a new all-time high as funds race to short stocks 🚨🚨 pic.twitter.com/myRQpVSfUG
— Barchart (@Barchart) May 26, 2025
This u-turn of the u-turn sets the table back to Thursday pre-escalation.
How long until traders remember that the China pause rally was already ending and breadth was imploding? pic.twitter.com/aspQdEx3Ie
— Mac10 (@SuburbanDrone) May 25, 2025
China experiencing its own 2008 GFC only x10 worse. https://t.co/055NZwUjTg
— The Great Martis (@great_martis) May 26, 2025
Which side will capitulate first? pic.twitter.com/bMt5AVHZrA
— THE SHORT BEAR (@TheShortBear) May 26, 2025
Hedge funds are ramping up their borrowing to extreme levels, pushing gross leverage to an all-time high while betting aggressively against stocks. The latest data from Goldman Sachs confirms a surge in short positions, with funds stacking bearish bets in anticipation of market declines.
Short-selling has exploded across multiple sectors. Hedge funds have built up 948 billion dollars in short exposure on individual stocks, alongside 218 billion dollars in short positions on exchange-traded funds. This marks the largest monthly increase in ETF short interest in more than a decade.
Financials and biotech stocks are facing the biggest pressure. The S&P Regional Banking ETF saw short interest spike 50 percentage points from February to April, while the S&P Biotech ETF jumped 27 percentage points. Hedge funds are wagering that these industries will continue sliding.
Skepticism is spreading across the broader market. Short interest in the median S&P 500 stock now stands at 2.3 percent of market float, exceeding historical averages and signaling deep uncertainty about recent gains.
Despite the heavy short-selling, hedge funds are maintaining profits. Long-short funds have delivered a 1 percent year-to-date return, largely driven by selective stock picks. The most favored long positions include Amazon, Meta, Alphabet, Microsoft, and Nvidia, all of which have outpaced broader market trends.
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