Short interest remains low relative to historical norms over the past 10–15 years. The median short interest for S&P 500 stocks is around 1.6%–2.4% of float or market cap as of late 2025/early 2026, depending on the measure, median stock ~1.6% per Nasdaq data; higher aggregates ~2.4%–2.7% in some reports.
This is near decade lows, particularly since post-COVID declines in 2020, and has been generally declining since peaks around 2016. Over the last decade: Typical median short interest in S&P 500 stocks ranged from 1.6% to 2.9%.
It peaked higher in earlier periods e.g., >3% in 2008. Recent reports describe S&P 500 short interest as at decade lows or seven-year highs in some weighted measures, but overall sentiment and data point to low bearish betting amid the bull market.
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Some sources note elevated short interest in dollar terms ~$820 billion at end-2024 due to higher stock prices or in specific sectors/small-caps, often for hedging mega-caps rather than outright bearishness. However, as a percentage of float, the standard measure for comparison, levels are not exceptionally high compared to the past decade.
High short interest would signal heavy bearish bets, but current data suggests limited short selling in the ongoing rally. Current data confirms that short interest in the S&P 500 remains low by historical standards, particularly when measured as a percentage of float or shares outstanding.
Median short interest for S&P 500 stocks is around 2.7% of market capitalization as of January 2026, with some measures near 1.6%–2.4%. For large-cap stocks including most S&P 500 constituents, the short interest ratio is near decade lows.
Proxy via SPY ETF: Short interest ~113 million shares, with days-to-cover ~1.5–1.6 (very low). Futures short positions also declined ~32% year-over-year. This low level reflects limited bearish conviction among investors amid the ongoing bull market.
Low short interest indicates few investors are actively betting on a broad market decline. This suggests widespread optimism, driven by expectations of solid earnings growth ~15% projected for 2026, potential Fed rate cuts, and AI-related productivity gains.
It acts as a contrarian “wall of worry” absence—markets often climb when bears are scarce, but extreme low short interest can signal complacency.
Reduced Fuel for a Short Squeeze
Unlike periods of high short interest like in 2021 meme stocks, there’s little potential for forced covering to propel explosive upside. Rallies would rely more on fundamental buying rather than short covering.
With few shorts to cover on bad news, downturns face less natural buying support. Pullbacks could accelerate if sentiment shifts due to higher-for-longer rates, tariff impacts, or AI spending slowdowns. High valuations, CAPE ratio ~40+ leave the market “priced for perfection,” amplifying risks from disappointments.
Recent increases in short interest to 2.7% median appear driven by hedging mega-cap tech stocks rather than pure downside bets. Dollar-value shorts hit records ~$820B end-2024 due to higher prices, but percentage terms remain low—reflecting portfolio protection in a top-heavy index, not widespread fear.
Broader Market Dynamics for 2026
Analysts forecast modest gains, average target ~7,100–7,300, implying ~4–7% upside from late-2025 levels, but with growing risks: softening labor market, policy uncertainty, and narrow leadership. Low shorts support continued upside in a “no-landing” economy but highlight fragility—any reversal in catalysts could lead to sharper volatility without short-covering backstop.
Low short interest is supportive of the bull case in the near term— limited downside conviction but increases asymmetric risk to the downside if conditions deteriorate. It’s a sign of strength in the rally, yet a potential warning of over-optimism at elevated valuations.