Short sellers spare consumer staples as summertime bets rise against US stocks

Short sellers pulled back their bets against consumer staples stocks on US exchanges during the summer months amid a general rise in overall short interest across equities.

Short interest in the consumer staples sector — which includes Walmart Inc., The Procter & Gamble Co., Costco Wholesale Corp. and other companies that make and sell products viewed as consumer essentials — dropped to 3.87% at the end of August from 4.16% at the end of May, according to the latest S&P Global Market Intelligence data.

Consumer staples was the only one of the 11 stock sectors to see a decline in short interest for that three-month stretch. Short interest in the industrials sector jumped 21 basis points (bps) from the end of May to the end of August, increased 20 bps in the healthcare sector over that stretch and jumped 19 bps in the real estate sector.

The decline in short interest against consumer staples stocks could be motivated by the decline in inflation and the Federal Reserve's upcoming push to begin cutting rates in response. In 2022, when inflation spiked to levels not seen since the early 1980s, the S&P 500 consumer staples sector fell about 3.2%, well below the overall S&P 500, which fell near 20% on the year. Consumer staples likely did not lose significant ground as rising prices compelled consumers to spend less on discretionary items but continue to buy essentials while paying more for them. From the start of 2023 to the end of August 2024, the sector increased about 13.6%, compared to the broader S&P 500, which rose 47.7%.

Sector breakdown

Within consumer staples, the most shorted stock at the end of August was Smart for Life Inc., with 53.5% short interest, more than double the short interest in the stock just a month earlier.

Beyond Meat Inc. was the second-most shorted stock with 36.5% short interest at the end of August, down from 38.4% at the end of July.

Packaged foods and meats stocks were the most shorted industry within the consumer staples sector with 4.1% short interest, up from 3.5% at the end of July.

Household products was the second-most shorted consumer staples industry with 4% short interest, up from 3.9% at the end of July.

Most shorted overall

Smart for Life was the most shorted stock at the end of August, just above Innovative Eyewear Inc., which had 52.4% short interest, and BioCardia Inc., which had 52.2%.