Dear clients,
The sharp drop in U.S. stocks this year has boosted the returns of shortists, who may finally be celebrating their first annual gain since 2018, thanks in part to betting on Tesla, Amazon and other mega-cap stocks that have been building markets for years.
According to S3 Partners, an analytics firm, short sellers — investors who bet on a company’s share price to fall — generated $303.7 billion in realized and unrealized profits in 2022. This is four times more than in 2018, their last profitable year.
The most attractive shorts were Amazon, Meta Platforms, Apple Inc and used car dealer Carvana Co. Tesla’s collapse was especially helpful for shorts. The S&P 500 fell nearly 19% on its way to its biggest annual percentage decline since 2008 after the Fed’s rate hikes dried up risk appetite.
According to experts, this year was favorable for shorting, as the economic environment stood against the entire market. For years, short positions just didn’t work.
Not all short strategies have worked out this year, however. According to data provider HFR, hedge funds that bet on rising or falling stock prices lost 9.7% in November.
Recent years for the „bears“ were quite difficult. The anti-covid measures of 2020 brought a loss of $241.7 billion, and in 2021 the shorts lost another $142.4 billion when big rallies in meme stocks like GameStop hurt firms that were betting against such companies.
