Hedge funds are being forced to cover their bearish bets, as the stock market continues to defy doubters

• The stock market has defied expectations this year – with the S&P 500 up 18% year-to-date. 
• Hedge funds have been caught off-guard by the market's rally, losing over $175 million this year, per S3. 
• June and July marks the largest short-covering period by hedge funds since 2016.

Hedge funds who were betting on a market correction have been left reeling from the stock market's remarkable rally that has defied all bearish bets so far this year. 

Short-covering, where sellers buy back borrowed stock to return it to the lender, has reached levels not seen since 2016, according to a report by S3 Partners obtained by the Wall Street Journal.