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Citadel Securities says US bull market drivers remain intact

Citadel Securities data showed retail investors logged their biggest week of stock selling since 2022, dragging leveraged ETF assets down 28% to $154 billion.

Reported · Written up by our desk · North America

Citadel Securities said the factors behind the US stock rally to record highs this year remain in place, but markets are shifting away from speculative, flow driven trading toward fundamentals like earnings, corporate demand, and the broader macro backdrop, according to a note to clients cited by LiveMint Markets.

Scott Rubner, head of equity and equity derivatives strategy at the market maker, pointed to turbulence in technology, where last month saw a sharp setback as concerns grew that the artificial intelligence trade had run too far, too fast. He noted the Nasdaq 100 dropped the most in more than a year in July, and a chipmaker gauge posted its worst month since 2008.

Rubner also highlighted retail activity, saying retail investors recorded their largest week of stock selling since 2022, with selling concentrated in tech. The reported pullback reduced leveraged exchange traded fund assets by 28% to $154 billion, while financing costs for equity positions fell, suggesting trading desks faced less pressure and leverage demand eased.

Looking ahead, Rubner argued that strong earnings have been helping offset prior concerns, with companies surpassing already elevated expectations. He added that valuations have become more attractive and corporate buyback demand is expected to accelerate as earnings blackout windows expire, noting investors may spend more time focused on fundamentals rather than positioning.

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