According to the most recent available positioning snapshot, hedge funds pushed an already historic Treasury short to new extremes just prior to a renewed bout of US regional banking turmoil last week.

Indeed, the overall short in Treasury futures has grown every week for two months, in what counts as the longest stretch in half a dozen years.

That could’ve presaged a painful experience given the rollercoaster in rates. Assuming those bets were directional (as opposed to, say, the other leg of a basis trade the Fed might bail you out of if you happen to blow up), they were offside at various intervals, which could’ve contributed to volatility.

You can make either case pretty convincingly. On one hand, inflation is more than double target and 10-year yields are ~100bps off last year’s highs. On the other hand, consensus sees a recession triggered by the lagged effect of policy tightening and assumptions about constrained credit tied to bank stress.

Whatever the case, and assuming the bulk of the leveraged fund short is in fact indicative of bearishness and not just the other side of a long in cash Treasurys as arbitrage opportunities reemerge, US equity bulls will be hoping hedge funds are wrong. This year’s gains for the S&P 500 are entirely attributable to duration-sensitive growth shares, which would suffer anew in a bond selloff.

While editorializing Monday around global equities’ market cap skew towards stocks that prefer lower bond yields, SocGen’s Andrew Lapthorne noted that “this group of falling discount-rate-loving stocks is highly concentrated, with North American stocks accounting for 80%.”

“When we measure the percentage of each MSCI region that prefers falling bond yields, North America is split 50/50 overall,” Lapthorne went on to say.

With the above in mind, you could argue (and Lapthorne alluded to this) that it’d be better for US stocks if economic growth stays below-trend. Too much of a good thing in terms of robust macro outcomes could vindicate bond shorts and eviscerate growth stock longs.

That said, and as discussed here over the weekend, mega-cap tech would suffer in an outright recession along with everything else. If a sharper slowdown in cloud and ad spend didn’t do the trick, investor liquidity needs surely would. As Goldman’s David Kostin put it, “During risk-off events, funds often sell more popular and more liquid stocks first.”