Key Takeaways:
Citadel Securities' Scott Rubner is telling clients to sell into strength and buy cheap protection into September, the first time since the July reset he has favored trimming exposure over chasing the market higher.
The S&P 500 has rallied about 22 percent since its March 30 low, adding roughly $12 trillion in market capitalization in five months, but the tailwinds that carried it through August are fading just as the calendar turns back toward macro. Rubner, chief equity and derivatives strategist at Citadel Securities, said the near-term risk/reward has shifted even as he remains constructive on the longer-term equity outlook.
"The question I keep coming back to is simple: what is the next catalyst that pushes equities meaningfully higher from here?" Rubner said in the firm's Global Market Intelligence note published Aug. 31. "A few weeks ago, the answer was easier."
The setup has changed on four fronts. Earnings delivered and are now largely in the rearview, with 93 percent of S&P 500 weight reported, 88 percent beating EPS estimates by a median of 7 percent and Q2 growth tracking around 33 percent — the strongest pace outside post-recession recoveries, on the steepest upward revision path since at least 2000. Retail remains a net buyer but historically becomes the smallest source of demand in September, with net buying on S&P 500 down days running at roughly half the all-month average. Corporate buybacks, which saw more than $1.1 trillion of authorizations move back into open windows, begin to fade as pre-earnings blackout periods accelerate around Sept. 12. And systematic strategies have already redeployed much of the capacity created by the July reset, with CTA, vol-control and risk-parity exposure rebuilt from the lows.
The asymmetry is sharpest in the options market. The VIX closed at 14.4 on Aug. 28, its second-lowest level since December 2025, while 1-month 25-delta downside protection in the S&P 500 fell to its cheapest since December 2024. Put/call skew ranks in the first percentile of the past year, and VVIX — the volatility of volatility — sits in the first percentile since the start of 2025. Single-stock vol has collapsed even harder: average 1-month at-the-money implied volatility across the 15 largest SOX constituents climbed from 53.0 to 77.2 over 74 sessions into July expiry, then gave the entire move back in just 20 sessions, settling at 46.0 — 40 percent below the peak and below where the run-up began.
"Investors are entering a much more macro event-heavy period while paying relatively little premium for protection," Rubner said. "There is more room for volatility to reprice higher than for another volatility collapse to provide the same tailwind to equities."
The catalyst calendar turns decisively toward macro starting this week. Nonfarm payrolls land Sept. 4, followed by PPI on Sept. 10, CPI on Sept. 11 and the Federal Reserve's rate decision with a Summary of Economic Projections on Sept. 16. The 10-year Treasury yield is holding near 4.67 percent, and money markets price roughly a 57 percent chance of a 25-basis-point hike at that meeting, according to Live Trading News. Unlike an earnings season dominated by positive surprises, the macro calendar presents two-sided risk.
Three technical events compound the window. Approximately $9.6 trillion of U.S. options exposure — about 35 percent of the total — expires by Sept. 18, with $6.2 trillion set to roll off on triple witching alone, tracking to surpass June's record $7.7 trillion expiration. As those positions expire, supportive dealer long-gamma can fade, removing a shock absorber underneath equities. At quarter-end, the top 100 U.S. pension plans, funded at roughly 112 percent — the highest since 2001 — face incentives to de-glide and immunize, creating mechanical equity selling into fixed income. And September is the only month since 1928 in which the S&P 500 has finished lower more often than higher, down 55 percent of years with an average return of negative 1.1 percent; in midterm-election years the average drops to negative 1.5 percent with a 6.2 percent average selloff.
Rubner frames the next several weeks as a tactical reset rather than the start of a bear market. The historical midterm path weakens through month-end before recovering in October and accelerating around Election Day into year-end. "I would use strength to reduce some exposure and add inexpensive protection into this event window," he said. "If September delivers one, it could create a better entry point as we move toward a potentially more constructive setup beginning around mid-October."
This article is for informational purposes only and does not constitute investment advice.
