Short sellers are increasing their bets on the stock market crash
Will the stock market crash in 2022? Most on Wall Street don’t think so, but small vendors are betting on it.
Short-term interest in the S&P 500 increased by 11 basis points from 2.09% to 2.2% between late last year and mid-March, as reflected in the latest data from S&P Global Market Intelligence. The benchmark stocks in every sector of the benchmark, except financially, rose significantly during the period as the index improved to an all-time high at the beginning of the year.
Waggers made the biggest jump against consumer discretionary stocks in a three-month period, rising 74 basis points to 5.24%. Growth in smaller positions continued to be driven by higher monthly inflation, putting pressure on commodity demand.
The energy sector then jumped 72 basis points to 3.91% in mid-March – the highest level since October 2020 – as investors are unlikely to be able to keep up with the skyrocketing oil prices.
The financial sector, meanwhile, has seen the slowest growth in any sector, growing by only 9 basis points as the banking industry is expected to benefit from interest rate hikes this year and next by the Federal Reserve.
The S&P report comes as investors anxiously watch key indicators of a bearish market. The most closely watched part of the yield was the flat and brief reversal in Tuesday’s event which has a historical track record of predicting a recession, an economic contraction in which stock prices generally fall.
While this is a hurricane for small retailers, their bets on the crash are still unlikely to pay off.
Deutsche Bank notes in a note that the market has been booming since 1978, with curves reversing in all six cases. On average, the S&P 500 returned more than 19% to its next peak since the day of the curve, and it took three to five months to reach that peak.
A small interest increase makes sense. The war in Eastern Europe, 40 years of high inflation, a drop in the supply chain and a rise in interest rates from the Federal Reserve have given investors a restful start. The headwinds were enough to drag the S&P 500 to improve, which is commonly referred to as a drop of more than 10%.
Yet, despite the pot-churning in 2022, the S&P 500 has bounced back from its lowest level of the year in early March to 11% by the end of Tuesday and is only 4% shy of reaching new all-time highs. Moreover, the momentum is likely to continue – at least for now, as investors turn the page in March and move into the new month.
“The good news is that stocks really do like April,” LPL Financial Chief Market Strategist Ryan Detrick said in a note, adding that every month since 2006 has been green. Since 1950, but that’s an incredible 15 over the last 16 years. “