On August 13, Citadel Securities’ head of equities and derivatives strategy, Scott Rubner, released a new market analysis report.
Amid lingering macro risks and significant market divergence, Rubner provided a bullish checklist of 10 reasons. He believes that after a mature deleveraging cycle, multiple demand sources are strengthening simultaneously while selling pressure is fading.
While macro concerns are plentiful, most who reach out ask the same question: What could go wrong? That question remains important. However, for August, Rubner suggests a more pressing question: Who will be the buyers at higher prices?
Earnings Are Driving Gains, But Valuations Are Compressing
Reason 1: Earnings Are Exceeding Expectations
The S&P 500’s second-quarter earnings per share growth rate is around 33%, marking the strongest level outside of post-recession recovery periods. More critically, Rubner notes that companies are not just beating already-high expectations; they are on the "steepest earnings revision path since 2000." As of August 9, 429 of the 503 index constituents had reported, covering 74% of the index’s weight.
The message from U.S. corporations is straightforward: Earnings are beating expectations, and by a significant margin.
Reason 2: Valuation - It’s Earnings, Not Multiple Expansion
While the S&P 500 scales new highs, its 12-month forward price-to-earnings ratio has compressed from about 23.1 times in October to roughly 20.1 times currently, a contraction of about 15%. The reason is direct: earnings expectations are being revised up faster than the pace of stock price gains. The equal-weighted S&P 500 forward P/E stands at about 17.1 times, while the Nasdaq 100 forward P/E is below its 10-year average and in the 11th percentile of the past year.
Rubner said, "This is a completely different landscape from 1999. Earnings are doing the heavy lifting, not valuation expansion."
Leverage and Capital Flows: Selling Pressure Has Passed, Buying Power Is Rebuilding
Reason 3: Leverage - The Reset Is Maturing
Rubner believes the "global leverage reset looks increasingly mature." The impact of systematic deleveraging is largely complete, and the overhang of rule-driven selling pressure has diminished. The logic is that as volatility continues to decline and trends are re-established, systematic strategies (like CTAs and risk parity) will regain the capacity to add positions.
The next meaningful mechanical capital flow could be re-leveraging, not deleveraging.
Reason 4: Retail Investors - Buyers Are Back
Last week, retail investors on Citadel Securities’ platform became net buyers again, reversing a selling trend from late June. However, Rubner is more focused on signals from the options market. For the first time since April, the retail put/call ratio in options is leaning bullish, with the lowest bearish reading since the low point in late March. Meanwhile, activity in broad-based ETF options has surged. The average daily contract volume this month is 3.1 times the monthly average, a record high. The average daily net put premium is about $29 million, roughly eight times the one-year average and nearly 10 times the historical average.
Rubner’s assessment is that retail investors are repurchasing the market but are still paying for downside risk. Participation has returned, but confidence has not yet fully followed. He also suggests a potential path: the market can quickly move from caution to participation, and then to chasing gains.
Reason 5: Passive Capital - It Never Left
Household passive ETF demand remains extremely strong. Year-to-date net ETF inflows are approximately $1.6 trillion, or about $7.5 billion per day, which is 55% higher than the previous record. July alone saw net inflows of nearly $350 billion, a new monthly record. Four months in 2026 have already ranked among the top 10 monthly inflows on record.
Rubner’s conclusion is concise: Structural passive buyers never left the market.
Buybacks and Structure: Over $1 Trillion in Corporate Purchases Return to the Market
Reason 6: Buybacks - A $1 Trillion Window Reopens
This week, the corporate buyback window reopened with announced authorizations exceeding $1 trillion, the largest for this calendar milestone on record. Historically, August is one of the stronger months for buyback execution, with buyback volume expected to exceed stock issuance, continuously absorbing market supply. Notably, this is not a story exclusive to the tech sector. Nearly 70% of the largest buyback authorizations year-to-date come from outside the technology industry.
Corporate buying is returning, and it should increasingly benefit common stocks.
Reason 7: Index Structure - The S&P 500 Is Not the Average Stock
Rubner believes this is the most important point for understanding "why the current market is so difficult to grasp." This year, when the Philadelphia Semiconductor Index (SOX) fell more than 3% in a single day, the S&P 500 averaged a decline of only 0.8%, compared to the historical 20-year average of a 2.4% drop. The software sector averaged positive returns on those days, the first time since 2001. The reason lies in the index’s composition, concentration of weights, and the direction of marginal passive capital flows.
You can see both a brutal internal market and a well-performing index. Both are real.
Market Structure Improvement: Breadth, Volatility, and Options
Reason 8: Breadth Is Rising, Correlations Are at Lows
Over 70% of S&P 500 constituents are trading above their 200-day moving averages, the strongest market breadth since December 2024. Meanwhile, both 1-month and 3-month realized correlations are near historical lows. Rubner interprets this combination of rising breadth, falling correlation, and high dispersion as creating a richer environment for individual stock picking, with the opportunity set for single-stock alpha expanding. The equal-weighted S&P 500 (SPW) has outperformed the market-cap-weighted S&P 500 (SPX) over the past year.
Reason 9: Volatility - Below 15 Changes the Math
Volatility is transitioning from being an output to an input variable. Low volatility is often seen as a result of stock market gains. However, when the 30-day and 60-day realized volatility windows move lower, low volatility itself creates additional space for systematic strategies to add positions—a positive feedback mechanism. Additionally, extreme implied volatility in the semiconductor and memory chip sectors is normalizing. This month, the average 3-month at-the-money implied volatility for the top 10 SOX components in the S&P 500 has fallen by nearly 20 percentage points. The spread between VIXEQ and VIX has also narrowed significantly from its historical highs.
Low volatility is no longer just describing the market; it is beginning to change the math of capital flows.
Reason 10: Options - Hedging for Upside
This is the signal Rubner is watching most closely. August 4 was the single highest volume day for SPX call options on record, with volume roughly double the one-year average and 10% higher than the previous record in May. The five trading days from July 30 to August 5 also represented the largest five-day cumulative volume for SPX call options on record. More critically, nearly 35% of S&P 500 constituents exhibit a 3-month call skew inversion (where call option implied volatility exceeds put option IV), the highest proportion on record.
Rubner stated that investors are not just reducing payments for downside protection. In some parts of the market, they are willing to pay more for upside convexity. This behavioral shift is significant, representing a fundamentally different psychology.
Bottom Line: The List of Buyers Is Growing
Rubner concludes the report by noting that this remains a difficult market. Macro risks are real, and the path will not be linear. However, after reviewing the list, one thing stands out: the balance of capital flows is tilting in a more positive direction. He also flags the risk for September: seasonality may worsen, and positions could be more crowded. If August turns into a chase for gains, the buying capacity of today may have been consumed by then. August could be the month for buyers to return. September may be about asking how much ammunition remains for buying.
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