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Traders Are Shorting the S&P 500 at a Rate Unseen Since 2015

Sarah Ponczek
Traders Are Shorting the S&P 500 at a Rate Unseen Since 2015

(Bloomberg) -- Investors haven’t been this keen to short the U.S. stock market since the Federal Reserve started raising interest rates.

Short interest as a percentage of shares outstanding on the SPDR S&P 500 ETF Trust, or SPY, climbed as high as 7% this week, according to data from IHS Markit Ltd. That’s the highest share since 2015, when the benchmark gauge for American equities slipped into a correction as Fed officials began boosting rates from near zero.

This time around, there are countless culprits to blame for the fear. The U.S.-China trade tension only seems to be worsening, and the Fed remains adamant it’s on hold while the market keeps on predicting a rate cut. Still, the S&P 500 Index is only 4% away from its all-time high.

“There are some clouds forming on the horizon,” said Matthew Litfin, a money manager at Columbia Threadneedle Investments. Besides the U.S.-China dispute, “you also can’t really have this Goldilocks thing that we’re in, where the economy is pretty good and the Fed’s seen to be easing. The Fed doesn’t feed the fire, the Fed takes away the punch bowl. They don’t refill the punch bowl at the party,” he added.

The S&P 500 fell 1.2% as of 11:03 a.m. in New York Thursday.

To contact the reporter on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Rita Nazareth, Randall Jensen

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