The S&P 500 has climbed roughly 22% from its March low, adding about $12 trillion in market value, yet the multiple tailwinds that have powered this rally are now fading in unison.

Scott Rubner, chief equity and derivatives strategist at Citadel Securities, maintains his constructive long-term view on US equities but notes the near-term risk-reward has shifted. Heading into September, he points out that earnings season positives are largely exhausted, retail and corporate buyback demand historically weakens during the month, and the room for systematic funds to rebuild positions has narrowed considerably. Meanwhile, the macro event calendar is intensifying, and seasonal patterns show September is typically the weakest month of the year.

Rubner explicitly recommends that, for the first time since the July adjustment, he favors "selling strength and buying cheap protection" rather than chasing upside. He characterizes September as a "tactical downside window" rather than the start of a broader bear market turn, and expects a more constructive entry opportunity to emerge around mid-October once this window passes.

Earnings Catalysts Exhausted; Largest Positive Driver Removed

This earnings season has been exceptionally strong, but its market-boosting effect has largely been realized. According to Rubner's data, 93% of the S&P 500 by weight has reported, with 88% of companies beating earnings per share estimates by a median of 7%. For those that missed, the median shortfall was just 3%.

Second-quarter S&P 500 EPS grew approximately 33% year-over-year, the strongest rate outside of post-recession recovery periods, and the earnings revision path has been the steepest since 2000. With Nvidia results now in the books, the most significant single-stock catalyst is behind us. Historically, stocks tend to rise in the first month of earnings season, but momentum fades as the reporting calendar goes quiet. Rubner notes the corporate calendar will thin out substantially from here, removing the clearest source of positive surprises from the summer months.

Retail and Buyback Demand Both Softening; Demand Structure Under Pressure

Two key demand drivers supporting the August rally—retail investors and corporate buybacks—are facing seasonal contraction pressures.

On the retail side, according to Citadel Securities platform data, August daily average net nominal buying tracked at the 65th percentile of the past year, about 10% above the mean, indicating net buying on a directional basis. However, total daily average nominal buying sat at only the 35th percentile, 4% below average, showing muted overall participation. More critically, September has historically been the weakest month for retail demand, with both net nominal buying share and directional skew at annual lows. Since 2019, average retail net buying on S&P 500 down days in September has been only half of the monthly average, the lowest of any month.

On buybacks, year-to-date repurchase authorizations among Russell 3000 companies have surpassed $1.1 trillion, with 67% concentrated outside the technology sector, providing important support in August. But as more companies enter blackout periods ahead of third-quarter earnings, this source will continue to shrink. Rubner points out that the blackout window will accelerate noticeably around September 12, and this largest and most stable structural demand source will gradually diminish as the month progresses.

Protection Costs Are Low; Hedging Offers Attractive Value

The market is currently pricing downside protection at extremely low levels, which Rubner sees both as a risk signal and a tactical opportunity to build hedges.

The S&P 500 one-month 25-delta put/call skew has fallen to its flattest level of the past year, sitting at the 1st percentile. At the end of August, one-month 25-delta downside protection costs dropped to their lowest level since December 2024, while the VIX closed at 14.4, the second-lowest closing level since December 2025. Implied volatility is particularly cheap in rate-sensitive sectors such as small caps, financials, regional banks, and consumer retail.

The compression in single-stock volatility is equally striking. From late March to July expiry, the average one-month at-the-money implied volatility for the top 15 components of the Philadelphia Semiconductor Index rose from 53.0 to 77.2 over 74 trading days. Since then, all of those gains were given back in just 20 trading days, and after 30 days the reading had fallen to 46.0—down 31.2 volatility points from the peak, a decline of 40%, and even below the pre-rally starting point. Meanwhile, the VVIX (volatility of volatility) currently sits at the 1st percentile since early 2025.

Rubner summarizes that the market is entering a dense macro event period while investors can buy protection at exceptionally low premiums—a disconnect that itself creates an asymmetric positioning window.

Systematic Flows Fully Rebuilt; Competition Comes from Bonds, Not Equities

The room for systematic fund rebuilding that existed after the July correction has now been largely consumed. CTAs, volatility control, and risk parity strategies have all rebuilt exposure from July lows, with incremental flows concentrated in the S&P 500 and Russell 2000, while Nasdaq exposure remains roughly flat. Rubner notes that positioning is not crowded, but the market no longer has the untapped systematic buying reserve that existed after July's adjustment.

Meanwhile, a significant technical event is emerging at quarter-end. The funding ratio of the top 100 US pension plans sits at approximately 112%, the highest level since 2001. This elevated funding ratio continues to incentivize de-gliding and portfolio immunization activity, creating mechanical selling pressure on stocks and buying pressure on fixed income at quarter-end. Rubner points out that with systematic equity exposure substantially rebuilt from July lows and duration positioning still relatively underweight, the clearer systematic positioning opportunity may have shifted toward bonds rather than equities.

Seasonal allocation demand from equity mutual funds is also relatively weak—since 1984, September has been the month with the lowest equity mutual fund subscription ratio, with median subscriptions around 1.79% of assets under management.

Options Expiry and Macro Calendar: Dual Pressures Converge

The massive September quarterly options expiration could trigger another technical reset in the market. As of the September 18 expiration date, approximately $9.6 trillion in US options exposure will expire, representing about 35% of all US options open interest—with the single-day expiration on September 18 alone reaching $6.2 trillion, or roughly 23% of the total. At the current pace, September is poised to surpass June's record triple witching day of $7.7 trillion. As options positions expire or roll, the long-gamma hedging support previously provided by market makers may dissipate, removing another layer of support beneath the equity market.

The macro calendar also shifts significantly. Following the Jackson Hole symposium, the September 4 nonfarm payrolls report, September 10 PPI, September 11 CPI, and the September 16 Fed rate decision will arrive in quick succession. Unlike earnings season's abundance of positive surprises, macro catalysts present two-way risk, with the right-tail upside far less defined than before.

Looking at long-term historical seasonality, since 1928, September is the only month in which the S&P 500 has a higher probability of falling than rising—with a 55% down-close ratio, average monthly return of negative 1.1%, and average maximum drawdown of negative 4.7%. Weakness typically concentrates in the second half of the month. In midterm election years, September performance has historically been even weaker, with average returns of negative 1.5% and average maximum drawdowns of negative 6.2%. Rubner notes this path aligns closely with his view: tactical weakness first, followed by a more constructive positioning opportunity around mid-October—but it does not signal a reversal of the broader equity trend.