Bears bet $1 trillion on stock market decline

Investors are wagering approximately $1 trillion that US stocks will decline.

Since the start of the year, shorts on bears have resulted in a loss of $120 billion.

The S&P 500 has been making new highs for more than 14 months, with the market continuing to rise.

Billionaire Jeffrey Gundlach has stated that the situation is exhibiting indications of mania.

In June, investors placed more than $1 trillion in short positions in the US stock market, the highest amount since April 2022. This indicates that investors are expecting a decrease in stock prices and are willing to take losses in order to make a profit.

The Wall Street Journal, citing data from the research company S3 Partners, reported that market participants' losses in the first half of June alone amounted to $72 billion, and since the start of the year, they have totaled $120 billion.

Short-sellers purchase shares with the intention of selling them at a higher price later, thus profiting from the difference in price.

S3 Partners notes that there is still a large number of investors and hedge funds who are anticipating a correction in the overall market or at least in the stocks that have recently rallied in price.

Shares of Tesla, Apple, Microsoft, NVIDIA and Amazon have been the most popular among sellers this year, due to their outperforming growth. For instance, Tesla stocks have more than doubled in 2023, and Nvidia stocks have almost tripled. The other shares have increased by at least 40%.

High-tech stocks have been the driving force behind the growth of the S&P 500, accounting for almost all of it. Five stocks in this sector alone make up 25% of the total market capitalization of the entire index.

Jeffrey Gundlach, the founder and CEO of DoubleLine Capital, who has been dubbed "the king of bonds", declared that the stock market is, frankly, exhibiting indications of mania.

He believes the current situation is comparable to the one before January 4, 2022, when the S&P 500 hit a record high, only to be followed by a prolonged decline.

The Carson Group is confident that the S&P 500 will reach new heights by the end of the year, while Bank of America is uncertain if the recent surge in stocks is the start of a "new bull market".