Wall Street bears battered by the Reddit crowd earlier this year have yet to regain their gumption, even with stocks at records and valuations near two-decade highs.
The median short interest in members of the S&P 500 sits at just 1.6% of market value, near a 17-year low, according to Goldman Sachs Group. In Europe, a short-covering frenzy has sent bearish bets collapsing like never before in Morgan Stanley data.
At the same time, hedge-fund longs are near the highest relative levels in years at J.P. Morgan Chase prime brokerage.
They're all signs of the bullish mania propelling global equities to fresh records this month, thanks to the economic re-opening and big policy stimulus. The smart money has little appetite to wager against either expensive or deadbeat companies — especially after being lashed by the day-trader army earlier this year.
"There's just mass euphoria," said Benn Dunn, president of Alpha Theory Advisors. "No one wants to get their head ripped off by a short anymore."
The easing of lockdowns and vaccine rollout have driven a risk-on rotation in favor of what was once the least popular equities — low-quality and value shares. Hedge funds in both the U.S. and Europe have rushed to cover their shorts, with little appetite to add fresh bearish wagers on the newly underperforming parts of the market like growth equities.