Fears of a recession have intensified, and investors have begun betting on a U.S. economic slowdown, with retail, energy and health care stocks targeted by bears.
CNN reported that U.S. consumer stocks have become the focus of bears, in part because investors worry that soaring prices will dampen people’s willingness to spend, which will eventually lead to an economic slowdown that could even trigger a recession. “As of mid-March, consumer discretionary stocks remained the most shorted group, largely due to a contraction in discretionary spending due to a surge in inflation,” S&P said.
According to data from S&P, as of mid-March, the short position ratio in consumer discretionary stocks was 5.24%, the highest since mid-January 2021. Consumer stocks with the highest ratio of short positions include sporting goods retailer Big 5 Sporting Goods, retail clothing chain Citi Trends and RV and related products retailer Camping World Holdings.
As of April 6 this year, energy giant Chevron’s shares soared 40.44%, the highest gain in the Dow Jones index. But investors seem to believe that soaring oil prices will soon subside, hurting earnings and share price momentum for energy companies.
S&P pointed out that the short position ratio in energy stocks climbed to 3.91% in mid-March, the highest since mid-October 2020, as investors expected oil prices to remain unlikely to remain at record highs.
Healthcare stocks have also become short targets. As more people get vaccinated and oral antiviral drugs for COVID-19 become available, healthcare stocks may become less attractive as investments. Diagnostic services company Quest, analytical instrument maker PerkinElmer, pharmaceutical company Jazz Pharmaceuticals and medical device maker Tandem Diabetes were the most shorted healthcare stocks, according to Refinitiv data.
Deutsche Bank (Deutsche Bank) fired the first shot on the 5th to warn that the Federal Reserve (Fed) made a big move to fight inflation, which may trigger a recession in the US economy at the end of next year, becoming the first large investment bank to warn of a recession in the US.
Under the high inflation pressure, Fed Chairman Powell (Jerome Powell) recently released a radical hawkish signal, saying that the next rate hike will not be ruled out by more than 1 yard (0.25 percentage points).