Benzinga: Wall Street Hedge Funds Are Shorting U.S. Stocks and ETFs, Achieving Record High Leverage Ratios

05/27/2025

Hedge Funds Increase $25 Billion in Short Equity Futures Positions

Hedge funds have increased their short equity futures positions by $25 billion, marking the largest increase in over a decade within a three-week period. As short positions in ETFs and individual stocks surge, the total gross leverage has reached a historical high.

Since April, the S&P 500 index has rebounded significantly by 23%. However, as investors question the sustainability of the rebound brought about by tariff reductions, hedge funds are currently ramping up their bearish bets on the stock market, reaching record levels.

In the past three Commitments of Traders (COT) reports, hedge funds have increased their short equity futures exposure by $25 billion, achieving the largest increase in three weeks in a decade.

Wall Street Analysts: Public Skepticism on Short-Term Recovery from Tariff Sanctions Remains

Goldman Sachs analyst Ben Snider stated that the total gross leverage, including long and short positions, has surged to historical highs. Although net leverage (longs minus shorts) remains below February levels, the rapid growth of short positions has altered the market landscape. This surge highlights growing doubts about the market’s resilience to a V-shaped recovery following a tariff sell-off.

Steno Research analyst Oskar Vårdal noted that as economic growth and inflation begin to accelerate again, hedge funds and commodity trading advisors (CTAs) continue to combat the cycle, doubling down on long-term bonds and short-term risks.

What Are Hedge Funds Targeting for Short Positions?

Hedge funds are targeting ETFs on exchanges as well as individual stocks. Data from Goldman Sachs indicates that short positions in ETFs reached $218 billion in the second quarter, while short positions in individual stocks climbed to $948 billion. Notably, the short selling volume of U.S. ETFs in April saw the largest growth.

Among the ETFs listed in the U.S., the SPDR S&P Regional Banking ETF has seen its short holdings soar by 50 percentage points since mid-February, currently accounting for 96% of its float. The SPDR S&P Biotech ETF increased by 27 points to 111%, and the iShares Russell 2000 ETF rose to 33%.

The historically highest short positions in ETFs include the VanEck Gold Miners ETF, accounting for 12% of its float, the First Trust NASDAQ-100 Tech ETF at 4%, and the iShares Core S&P Mid-Cap ETF with a short amount of $1 billion.

Wall Street’s Surge in Interest for Consumer Staples Shorts

Wall Street’s interest in short positions encompasses sectors such as consumer staples, utilities, and healthcare, currently representing one-fifth of the total. The median short position in the S&P 500 index accounts for 2.3% of market capitalization, while short interest in financials and information technology sectors remains below long-term averages.

Which U.S. Stocks Are the Most Targeted for Bearish Bets?

Since the February peak, the U.S. stocks with the largest increases in short positions include Somnigroup (NYSE: SGI), Lucid Group Inc (Nasdaq: LCID), Amer Sports Inc. (NYSE: AS), Medpace Holdings Inc (Nasdaq: MEDP), Moderna (Nasdaq: MRNA), and First Solar Inc. (Nasdaq: FSLR).

This is purely market observation and not investment advice.

Risk Warning

Investing in cryptocurrencies involves a high level of risk, and their prices can be highly volatile, potentially resulting in the loss of your entire principal. Please assess risks cautiously.