Short Sellers Earned $159 Bln: Is Recent Rebound Sustainable or Not?
On Wednesday morning, Trump announced a 104% tariff increase on China. In response, China imposed an 84% tariff on the U.S. that evening. The EU also announced a countermeasure, imposing a 25% tariff on imports from the U.S. Subsequently, Shark Tank star Kevin O'Leary said he wants Trump to slap a 400% tariff on China.
Tariff numbers are getting larger and larger, yet the market's reaction has become increasingly calm. Trump even posted to rally people to buy $Trump Media & Technology(DJT)$ stock.
Trump is becoming absurd, but has the tariff trade war already played itself out?
Once tariffs exceed 100%, any additional hikes seem to lose significance.
US stocks might see a short-term rebound, but the medium-term outlook remains unclear. High tariffs on China are also very likely to have a noticeable impact on the US economy.
According to current consensus from FactSet, Wall Street’s projected EPS growth for the S&P 500 in 2025 has already been revised down from +14.1% at the beginning of the year to +10.5% now.
However, Tiger analysts believe that the market hasn’t priced in the potential EPS downgrade considering the current economic situation and tariff impact.
However, due to the risk of reflation, the Fed is unlikely to rush in to rescue the market this time. Instead, it will wait until economic data clearly weakens or some kind of liquidity crisis emerges.
$S&P 500(.SPX)$ NTM PE plunges, but not enough.
Following the recent plunge, the S&P's NTM (Next Twelve Months) PE ratio has dropped to 18.3x, down from a recent high of 22x.
But over the past 20 years, the average NTM PE has been around 16x (see chart), with a median of 15.5x. So even with the current valuation uplift trend, 18.3x is still considered high (80.4th percentile). During the 2022 bear market, valuations dropped to below 16x.
Short sellers in the US stock market earned $159 billion in just six trading days
As the trade war continues to escalate, U.S. stocks have plunged over 10%, and short sellers who bet on the decline raked in $159 billion in paper profits in just six trading days.
According to the analytics division of S3 Partners:
"During this market correction, short selling has been extremely profitable across the board. 81% of short trades were profitable."
Besides shorting stocks directly, could inverse ETFs be profitable in this market? Keep in mind that leveraged ETFs work better in trending (one-side) markets. If the sharp selloff pauses and the market starts to move sideways, you may suffer from leveraged ETF decay.
Could a strangle strategy be a better play in this volatile environment? That said, be cautious of margin calls caused by extreme volatility.
So, what do you think — do these latest tariff retaliations still significantly affect the market?
Is the short-term rebound just a dead cat bounce?
Would you choose to short, buy inverse ETFs, or quietly buy the dip?
Leave your comments or post directly in our topic 104% Tariff: How Long Will Trade War Drag the Market Down? to win tiger coins!
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Once tariffs exceed 100%, any additional hikes seem to lose significance.
US stocks might see a short-term rebound, but the medium-term outlook remains unclear. High tariffs on China are also very likely to have a noticeable impact on the US economy.
According to current consensus from FactSet, Wall Street’s projected EPS growth for the S&P 500 in 2025 has already been revised down from +14.1% at the beginning of the year to +10.5% now.
what do you think — do these latest tariff retaliations still significantly affect the market?
Is the short-term rebound just a dead cat bounce?
Would you choose to short, buy inverse ETFs, or quietly buy the dip?
Leave your comments or post directly in our topic 104% Tariff: How Long Will Trade War Drag the Market Down? to win tiger coins!
This short-term rebound could very well be a dead cat bounce. With EPS estimates revised down and the Fed unlikely to step in quickly, there's not much support under the market. I’ve trimmed some tech positions into strength and am holding cash in case we retest lows. The S&P’s current valuation still feels high compared to historical averages.
Instead of betting heavily on inverse ETFs—which can suffer from decay—I’ve been testing strangle strategies on SPY and QQQ to play the volatility. It offers flexibility without committing to one direction. @Tiger_comments @TigerStars
至于最新一轮的关税报复，我个人认为它对市场的“情绪影响”大于实际“基本面冲击”。过去几年，市场其实已经习惯了这种你来我往的贸易博弈，反应不会像以前那样剧烈。但它确实加剧了市场的不确定性，让资金更加谨慎，尤其是外资流向。因此，波动性会提升，个股分化会加剧。
现在的反弹，我不完全认同是“死猫跳”。部分板块确实有基本面支持，比如科技、军工、能源，甚至是某些消费复苏链条。但整体市场方向仍未明朗，仓位控制很关键。我不会盲目做空或重仓反向ETF，因为这些策略在错判时损失极快，适合短线高手。
我的做法是保留部分现金，关注优质资产的低估机会，分批布局，哪怕建仓慢一点也无妨。有些标的跌出了性价比，悄悄逢低吸纳，比站错方向强太多了。此时拼的不是胆子，而是耐心和节奏。
market is just going to be volatile at this level until a resolution is fixed.