Behind the retail frenzy in the US stock market, Wall Street short sellers lost $2.5 billion this month
The investment frenzy among retail investors in the U.S. stock market led to a loss of $2.5 billion for Wall Street short sellers in July, which is four times the market average. Speculative stocks like Kohl's have risen over 50% in the past month. Retail buying of companies such as Opendoor and Krispy Kreme continues to increase, with trading frequency on the rise. Despite facing several key economic events, analysts believe that retail enthusiasm may persist, potentially driving stock prices even higher
While retail investors in the U.S. stock market continue to celebrate, Wall Street short sellers are suffering painful losses.
According to S3 Partners, as of last Thursday, investors shorting the 50 stocks with the highest short interest in the U.S. lost $2.5 billion in July. These stocks include several "Meme stocks" like Kohl's, as retail investors flocked to these speculative stocks, resulting in short sellers' losses being four times the average short losses in the U.S. market. Over the past month, Kohl's stock has risen more than 50%.
The 50 stocks with the highest short interest in the Russell 3000 index tracked by Goldman Sachs have seen a record nine consecutive weeks of gains. According to Justin Walters, co-founder of Bespoke Investment Group, these stocks have collectively risen 33% during this period, far exceeding the 10% returns of the Russell 3000 index and the S&P 500 index, with a 15% increase just in July.
The strong performance of these speculative stocks has greatly boosted retail investor confidence. Data from Vanda Research Corp. shows that net buying of companies like Opendoor Technologies Inc. and Krispy Kreme Inc. by retail investors continues to rise, along with increased trading frequency.
Despite key events and data coming this week, including the end of the Trump tariff suspension, the Federal Reserve's monetary policy decision, earnings reports from four companies in the "Mag 7," and the non-farm payroll report, analysts believe retail enthusiasm may persist.
Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, stated, "Retail investors may pull institutional funds into this speculative rebound and sustain it." When hedge funds hold positions on both sides of these stocks, combined with buying pressure from retail investors, these stocks tend to become more volatile and generate higher returns.
Marco Iachini, senior vice president at Vanda Research, bluntly said, "Retail investors are squeezing hedge funds and forcing stock prices up; I see no signs of this momentum fading."
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