US Short Interest Reaches Highest Level Since 2012, Putting Squeeze Risk in Focus

Short interest in the US stock market has climbed to its highest level in years. The increase suggests bearish bets are building as valuation concerns combine with economic uncertainty.

On May 26, research platform The Kobeissi Letter wrote on X that short interest among S&P 500 constituents had reached a multiyear high.

Median short interest across S&P 500 stocks rose to 3.0% of market capitalization, according to The Kobeissi Letter. That is the highest level since 2012 and double the level seen during the Covid-19 pandemic in 2020.

The reading is also high compared with past crisis periods. During the 2008 global financial crisis, median short interest in S&P 500 stocks stood at 3.8% of market capitalization. While the current figure remains below that peak, it has entered a historically elevated range.

Bearish positioning was even more pronounced in the most heavily shorted stocks. Among the top 10% of S&P 500 stocks by short interest, short interest rose to 8.0% of market capitalization, the highest level since 2018.

The Kobeissi Letter said both measures are now above levels seen during the bear market that followed the collapse of the dot-com bubble. It added that investors should watch whether the market is entering a short-squeeze phase.

The rise in short selling reflects a defensive stance among investors in the near term. If stocks rise instead, however, the unwinding of short positions could turn into buying pressure and fuel a rebound in the indexes.