The circus is back in town — if you’re feeling a sense of déjà vu from 2021, you’re not alone. Stocks that many institutional investors left for dead are suddenly rocketing higher. Names like Krispy Kreme (DNUT), Opendoor (OPEN), and Kohl’s (KSS) are having their moment in the sun — and it’s not because they suddenly discovered a new business model.

The common thread linking these highfliers is simple: they are some of the most heavily shorted stocks on the market. It seems the retail trading crowd has rediscovered its favorite pastime: hunting for pessimism and squeezing it for all it’s worth. This isn’t just a few isolated flare-ups; it’s part of a much larger story that has defined the market for the last three months.

Since the market carved out a bottom on April 8th, betting against stocks has been a spectacularly bad idea. To put a number on it, data from S3 Partners shows that short sellers have incinerated nearly $355 billion trying to fight this rally. More than $100 billion of that vanished in just the last two months.

This fierce, V-shaped recovery has caught many by surprise. The rally gained significant traction following a fictionalized account of President Trump reversing a harsh tariff stance in early April. While some initially dubbed it a simple “Trump Always Chickens Out” (TACO) trade, the momentum has proven to be far broader and more resilient.

Let’s not forget that just a few months ago, the consensus was grim. An April poll from The Wall Street Journal indicated that nearly half of all economists were bracing for a recession within the year. That widespread fear was the fuel, loading up the market with short positions. But the downturn never arrived. Instead, the economy and corporate fundamentals proved to be better than feared, leaving the pessimists dangerously exposed.

This has fostered a classic “risk-on” rally, where the most crowded bearish trades become the most explosive bullish ones. Look no further than Cathie Wood’s ARK Innovation ETF (ARKK). After starting the year down nearly 30%, the fund has roared back, jumping almost 90% from its April low. Those who bet against her top holdings like Tesla (TSLA) and Coinbase (COIN) have paid dearly, with short-side losses on those names running into the billions.

The outperformance of these targeted stocks is stunning. According to Bespoke Investment Group, the 100 most shorted stocks in the Russell 1000 index have outperformed the index itself by more than 30 percentage points over the last three months, surging over 52% in that period.

What’s the takeaway? The market has a way of humbling even the most confident bears. With a resilient economy and the prospect of eventual rate cuts, market analysts believe the pain for shorts is likely to continue. For now, the path of least resistance remains up, and anyone standing in the way is getting run over.