Short Sellers Suffer Biggest Squeeze Since 2008 as Risk Rally Roars

The most-shorted stocks on Wall Street are surging, delivering heavy losses to bearish traders in what analysts describe as one of the most painful short squeezes in years.

According to Goldman Sachs, its basket of heavily shorted U.S. stocks has jumped 16% in October, vastly outperforming the S&P 500’s 0.7% gain and putting the index on track for its best October since records began in 2008.

The rally reflects a wave of forced buying by short sellers, who were caught off guard by a rebound in risk appetite and improving sentiment in equity markets. Goldman’s unprofitable tech basket — which includes speculative names such as Roku and Peloton — also surged 16%, marking its strongest October since 2014.

Traders say the combination of Fed rate-cut expectations, easing inflation, and renewed AI enthusiasm has pushed investors back into riskier assets, driving short covering across tech and small-cap stocks.

Analysts warn that the short squeeze underscores how volatile and sentiment-driven U.S. markets have become, where algorithmic trades and retail momentum can trigger outsized moves in underperforming names within days.

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