S&P 500’s Record Run Squeezes Shorts as FOMO Overwhelms Hedging Demand

The S&P 500 closed at an all-time high for a ninth straight week on May 29, 2026, extending its longest winning streak since 2023 as investors gripped by fear of missing out abandoned downside protection and chased upside exposure. A Goldman Sachs basket of most-shorted stocks surged over 30% in two months, inflicting heavy losses on bears. Hedging costs have collapsed. The cost to protect against modest declines fell to its lowest since early 2025, while tail-risk insurance slid back to year-to-date lows even as economic data weakened. RBC Capital Markets’ Amy Wu Silverman warned skew continues to grind lower, making protective puts exceptionally cheap. Yet positioning reveals a lopsided bet on further gains: Nomura data shows VanEck Semiconductor ETF options are extremely bullish, and 20 of the Nasdaq’s 25 largest firms have call premiums in the top 10th percentile historically. Susquehanna’s Chris Murphy said traders are not just hedging downside risk, but hedging the risk of missing the next AI-driven rally. The risk-on shift extended across assets, with credit spreads near multi-decade lows and oil under pressure. Even a hot inflation reading and geopolitical tensions failed to derail the rally.