Capital you invest is at risk. | Capital you invest is at risk.

Close Navigation
Learn more about IBKR accounts
Rotation robustness; what the short data shows.

Rotation robustness; what the short data shows.

Posted July 22, 2024 at 10:45 am

Matt Chessum
S&P Global Market Intelligence

DOWNLOAD PDF VERSON HERE

As the stock market rally starts to broaden out, short sellers remain unconvinced of its potential.

As confidence grows for a September rate cut by the Federal Reserve Bank, following the softer than expected inflation data seen earlier this month, investors appear to be repositioning their portfolios as the market rally expands from the narrow leadership of the “magnificent seven”. As interest rate cuts lower the cost of capital, small-cap equities are set to benefit, and this is where investors appear to be heading, pushing the Russell 2000 up 10.13% year-to-date.

In the securities finance markets, short sellers appear to be unconvinced that the current rotation into small cap stocks is here to stay. The percentage of market capitalization on loan of the S&P500 Index is continuing to fall, signifying positive sentiment in the persistence of the current rally, whilst the opposite can be seen across the Russell 2000. Short Interest across the Russell 2000 index has been rising since July 12th.

With a growing number of risks on the horizon, looking at the short Interest data, it appears that investors may need a little more convincing before unwinding their current short positions across these two indices.

% Market cap on loan - s&p 500

Past performance is not indicative of future results

Originally Posted July 18, 2024 – Rotation robustness; what the short data shows.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

Join The Conversation

If you have a general question, it may already be covered in our FAQs page. go to: IBKR Ireland FAQs or IBKR U.K. FAQs. If you have an account-specific question or concern, please reach out to Client Services: IBKR Ireland or IBKR U.K..

Leave a Reply

Disclosure: Interactive Brokers Third Party

Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from S&P Global Market Intelligence and is being posted with its permission. The views expressed in this material are solely those of the author and/or S&P Global Market Intelligence and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: Options Trading

Options involve risk and are not suitable for all investors. For information on the uses and risks of options read the "Characteristics and Risks of Standardized Options" also known as the options disclosure document (ODD). Multiple leg strategies, including spreads, will incur multiple transaction costs.

Disclosure: Bonds

As with all investments, your capital is at risk.

Disclosure: Security Futures

Security futures involve a high degree of risk and are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading security futures, please read the Security Futures Risk Disclosure Statement. For a copy visit the Warnings and Disclosures section of your local Interactive Brokers website.

This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.