Short sellers poised to play their Trump card
27 May 2016 Washington DC
Image: Shutterstock
Short sellers are hoping to come out as the real winners of the US presidential election by positioning themselves to profit from the grand promises made by candidates to raise the federal minimum wage, according to a Markit report.
All three of the leading US presidential hopefuls, Hillary Clinton and Bernie Sanders for the Democrats and Donald Trump for the the Republican party, individually pledged to raise the current federal minimum wage from $7.25 to at least $12, which has the potential to dramatically affect the profit margins of America鈥檚 biggest employers.
Short sellers are hoping to leverage this campaign pledge by opening short positions with US stocks that have the worst net-income-per-employee dynamics, causing shorting in those companies to rise to 63 percent higher than the market average, according to Markit鈥檚 data.
Markit鈥檚 study on the new trend shows that average short interest across the worst ranked 10 percent of US equities ranked by the Markit Research Signals net-income-per-employee factor now stands at 7.3 percent of shares outstanding, over two thirds higher than the average seen across the rest of the market.
Since the elections process gathered pace, shares with poor net income to employee profiles have underperformed against the market average by 21 percent in the past nine months.
Markit noted that while share prices in these companies did bounce back somewhat in March and April, these stocks are still nearly 15 percent behind the returns of the 3,000 constituents of the US total cap universe, making them the worst performing group by quite a wide margin.
All three of the leading US presidential hopefuls, Hillary Clinton and Bernie Sanders for the Democrats and Donald Trump for the the Republican party, individually pledged to raise the current federal minimum wage from $7.25 to at least $12, which has the potential to dramatically affect the profit margins of America鈥檚 biggest employers.
Short sellers are hoping to leverage this campaign pledge by opening short positions with US stocks that have the worst net-income-per-employee dynamics, causing shorting in those companies to rise to 63 percent higher than the market average, according to Markit鈥檚 data.
Markit鈥檚 study on the new trend shows that average short interest across the worst ranked 10 percent of US equities ranked by the Markit Research Signals net-income-per-employee factor now stands at 7.3 percent of shares outstanding, over two thirds higher than the average seen across the rest of the market.
Since the elections process gathered pace, shares with poor net income to employee profiles have underperformed against the market average by 21 percent in the past nine months.
Markit noted that while share prices in these companies did bounce back somewhat in March and April, these stocks are still nearly 15 percent behind the returns of the 3,000 constituents of the US total cap universe, making them the worst performing group by quite a wide margin.
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