Strategists at BofA-Merrill see U.S. small-cap outperformance as fit to fade, predicting that earnings growth for the group will lag the market overall. By no means an illogical bet, as the iShares Russell 2000 ETF shorts are up almost half from their record low of four percent in January. But the bearish change in ETF short data shows that tech stocks may be the ones living on the edge.
Examining short interest data for ETFs tracking the S&P 500, Nasdaq 100, and Russell 2000 indices from just prior to the U.S. election, the outlier of bearish sentiment are the tech stocks, which have seen shorts treble, while S&P and Russell shorts have been chased out to levels below those seen before Trump was elected. Investors thinking the recent tech dip was only fleeting have to quickly decide if they want to be long a sector that may require weeks to bottom out.
Source: Bloomberg Pro Terminal
Trader – Senan Fuchedzhiev