The ‘meh’ 2024 short squeeze

When Roaring Kitty made a sudden, possibly faked and definitely spammy return to social media it triggered a surge in GameStop and adjacent 2021-era meme stocks, and excitement that another massive wave of hedge fund-wrecking short-squeezing was under way.

This time — true believers hope, at least — it might even be the mythical “REAL” short squeeze that will ruin all hedge funds, topple the entire global financial system and make diamond-hand apes fabulously wealthy in the process.

As Bryce noted at the time, some short positions in GameStop were shaken out, but this wasn’t a 2021 redux. In fact, the overall squeeze on short US equity positions has been notable, but it doesn’t even compare to those that happened around other big market turns like December 2023 and April 2020.

Goldman Sachs’ basket of the most shorted stocks by hedge funds has jumped by 25 per cent in recent weeks, flipping a 10 per cent year-to-date loss through April to a 7 per cent gain. But compared to the 2021 earthquake this has just been a minor tremor.

Moreover, thanks to the performance of popular longs like Nvidia, Meta and TSMC, hedge funds are generally doing well, with the average US long-short equity hedge fund up 8 per cent so far this year, according to estimates from Goldman’s prime brokerage. Here’s how Goldman’s “VIP” index of popular hedge fund longs have done versus the equal-weighted S&P 500 and a basket of the most popular short positions:

Most of all, despite all the online fury, single-stock short sellers seem to be going the same way as switchboard operators, town criers and broomsquires.

OK that’s a slight overstatement, but, as FTAV has pointed out before, there’s just a lot less of it around, with most shorting migrating away from individual stocks and towards index-level hedging.

Median short interest in S&P 500 companies has picked up a little lately, but remains near historical lows, and for the US stock market as a whole it is negligible:

Maybe we see a bit more action in the coming weeks, but there’s just not enough kindling out there to ignite the kind of short inferno that we saw in early 2021. Not that this will stop the “superstonkers”.