Citadel's Rubner:

Today, we believe much of the global technical reset is behind us. Importantly, the reset occurred through rotation, deleveraging, and stronger fundamentals, not through a deterioration in the macroeconomic backdrop.

The excesses that defined the early summer have largely been unwound. Retail investors reduced risk (more below), leverage normalized, market concentration declined, and many of the market’s largest technical headwinds have begun to fade. As a result, we believe investors can increasingly spend less time focused on positioning and more time focused on fundamentals.

Position sizes and risk budgets are likely to rebuild gradually, supporting a lower volatility grind higher rather than the type of V-shaped recovery experienced earlier this year.

The long-term structural themes driving this market, including retail participation, passive ownership, corporate demand, and the continued evolution of market structure, remain firmly intact. What has changed is the technical backdrop.

In our view, July likely pulled forward much of the typical August weakness. While volumes normalized from the extremes of the prior two months, retail investor behavior changed materially over the course of July. As many of retail’s highest-conviction AI positions continued to weaken, investors increasingly shifted from buying weakness to reducing exposure. That transition accelerated into the final week of the month, culminating in what is now on pace to be the largest week of retail equity selling since 2022.