Scott Rubner was not planning to publish on a Sunday. But after a weekend of client questions about market risk, Citadel Securities' head of Global Market Intelligence put out an unscheduled note on August 31, and its message is unambiguous: the violent technical washout that defined July is largely complete, and the market's centre of gravity is shifting back to earnings.
"July did not change the structural bull market. It reset it," Rubner writes.
What Just Happened?
Rubner describes the past month as one of the most technically difficult trading environments in recent years, marked by sharp rotations, elevated single-stock volatility, fast-changing leadership, and heavy deleveraging. Critically, he argues the reset came through rotation, position-cutting, and improving fundamentals rather than through any deterioration in the macro backdrop. In his view, July likely pulled forward the seasonal weakness that typically arrives in August. Despite the turbulence, he notes the S&P 500 sits only about 150 basis points below its all-time high, with the average equal-weighted stock within roughly 1% of its own record.
Retail Did Not Leave. It Changed Its Mind.
The defining feature of July, Rubner argues, was not lower retail participation but a material shift in retail behavior. Average daily retail cash equity volumes fell roughly 20% from June's record, yet July still ranks on pace as the fourth most active month in the firm's history. What changed was direction. As retail's highest-conviction AI positions weakened, investors moved from buying dips to cutting exposure, culminating in what Rubner calls the largest week of retail equity selling since 2022, with four straight sessions of net outflows and daily net notional nearly double the November 2025 episode.
The selling concentrated exactly where the buying had: Technology set an all-time weekly selling record in Citadel's dataset going back to 2019, exceeding the prior mark by more than 80%. Semiconductor and memory names saw net selling more than five times the previous record, and software recorded its largest single-day retail liquidation ever observed on the platform. Tellingly, retail kept selling into Thursday's bounce, the mirror image of its usual dip-buying instinct.
The Leverage Purge
Retail selling accelerated one of the fastest deleveraging episodes of the year. Leveraged ETF assets are down more than $60 billion from the June peak, with Technology leveraged assets off about 40% and semiconductor products down nearly 55% in a month. Concentration has eased in tandem: semiconductors have shed roughly $1.5 trillion in market capitalization, cutting the industry's S&P 500 weight from nearly 20% to 16%. Funding markets confirm the story. One-month equity financing spreads have compressed from 138 basis points over SOFR to roughly 50, a sign that leverage demand has normalized.
Volatility Under the Hood
Rubner highlights an unusual regime: expensive single-name hedging alongside suppressed index volatility, as low implied correlations and constant rotation kept the benchmark calm while individual stocks whipsawed. On days the SOX fell more than 3%, the S&P declined just 0.8% on average this year versus 2.4% over two decades, and software was actually positive on average, which he flags as a first since at least 2001. The last overhang, in his view, is semiconductor implied volatility, which is compressing and should improve liquidity and lower hedging costs.
Fundamentals Back in Control
With positioning cleaner, Rubner argues attention can return to fundamentals, and the fundamentals are cooperating. Consensus second-quarter S&P 500 earnings growth has been revised from 22.4% at the start of reporting season to roughly 45%, one of the steepest revision paths on record. Yet valuations have compressed rather than expanded: Tech now trades near 20x forward earnings, its one-year valuation low and well under the 10-year average of 23x. And the buyback window is reopening, with roughly 85% of the index eligible to repurchase shares by mid-August, historically one of the busiest buyback months of the year.
To be fair, uncertainty remains. Roughly 40% of the index by weight, including many semiconductor names, has yet to report. But Rubner remains constructive, arguing the structural pillars of the bull market, record retail participation, passive ownership, and corporate demand, are firmly intact.
Five Key Takeaways for Advisors and Investors
- The July drawdown was a positioning event, not a macro event, and the excess has largely been unwound.
- Retail capitulation in Tech, semis, and software hit historic extremes, cleaning up the market's most crowded trades.
- Leverage, concentration, and funding spreads have all normalized, reducing fragility.
- Earnings revisions are surging while valuations compress, an unusually favourable combination.
- Expect a lower-volatility grind higher, supported by reaccelerating corporate buybacks, rather than a V-shaped rebound.
Footnote:
1 Rubner, Scott. "August – After The Reset." Citadel Securities, Global Market Intelligence, 3 Aug. 2026, www.citadelsecurities.com/news-and-insights/global-market-intelligence/august-after-the-reset/.
