Hedge funds have sharply scaled back their bearish bets that the value of stocks is about to fall despite warnings of renewed market exuberance, with the proportion of shares earmarked for short selling at its lowest level since before the financial crisis.
The percentage of stocks borrowed by short sellers – who try to profit from a company’s share price falling – has dropped to the lowest level in the US, UK and the rest of Europe since the years before the collapse of Lehman Brothers, according to data compiled for the Financial Times by Markit.
The fall in short selling comes as Wall Street and markets in Europe trade at or near record highs, indicating that while some high-profile hedge fund managers have warned of excessive market euphoria, the industry is still unwilling to bet against the rally.