This year has been a tough year for shorting**.
Wall Street short sellers have lost nearly $178 billion this year, according to data provided to Yahoo Finance by S3 Partners.
The six of these investors who lost the most money all belonged to the Magnificent Seven, with Alphabet being the only tech stock that wasn't at the top of the list. These moves reflect the unexpected nature of 2023***, which many Wall Streeters didn't anticipate heading into the year.
But with the hype around AI in the spring of 2023, the shares of companies like Nvidia, Tesla and Meta have soared by more than 100% this year.
In recent weeks, as the market rally has outpaced the "magnificent seven", short sellers have also felt the pain of other **. Since the Fed meeting on November 1, investors have grown increasingly convinced that not only will the Fed not raise rates, but that it may cut rates sooner than many initially expected.
This belief has given rise to risky assets**, which include areas of market speculation that investors believe are more vulnerable to high interest rates, such as small- and mid-cap companies.
Steve Sosnick, chief strategist at Interactive Brokers, told Yahoo Finance that due to the increased risk appetite of investors"When the market is in full swing, bears are more susceptible to squeezing. "
This has been reflected in the market over the past month.
Companies such as Carvana and Affirm are heavily shorted, but they have soared in the FOMO chase, with more than 75% in the last month alone. When this happens, the bears are forced to cover their positions, pushing up the stock price and magnifying the losses of the short sellers.
S3 data shows that investors who are short Carvana have lost 22$500 million, while investors who shorted affirm lost nearly $1.5 billion.
Sosnik said"For companies where rising interest rates would have a negative impact, sentiment will certainly change if a rate cut is widely expected. "