Individual investors likely to slow stock buys in September – Citadel’s Scott Rubner

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Individual investors are expected to reduce their stock buying activity in September after being net buyers for 19 consecutive months, according to Scott Rubner, Citadel Securities' head of equity and equity derivatives strategy.

“Retail investors are the least active during the month of September of the entire year,” Rubner said, suggesting a potential shift in the market’s underlying support structure.

Citadel Securities’ data shows that retail flow has been a net buyer of cash equities in 27 of the last 28 trading sessions, and in 14 of the last 16 weeks. The firm’s retail clients have consistently been net buyers, both in shares and notional value, since early 2024.

“Retail activity has historically shown a stronger footprint in June and July based on data since 2017,” Rubner explained, while activity typically decelerates in August heading into September.

This seasonal pattern has been observed consistently across Citadel Securities’ trading units, with market participation slowing during the transition from August to September.

In contrast to retail investors, the firm reported that institutional clients have been bearish in 8 of the past 12 weeks, reflecting broader caution among professional investors.

However, Rubner noted a “sharp increase in call option activity” last week, indicating “a potential change in sentiment as high-flying names have created a ‘force-in’ dynamic.”

Volatility trends could further impact market dynamics, as high-volatility periods from earlier months fall outside the observation window. The 3-month realized volatility currently stands at 26, compared to just 9 for one-month and 13 for one-week measures. This decline in realized volatility may affect systematic strategies, with Citadel Securities projecting that “systematic positioning will likely reach full exposure by September, increasing vulnerability to downside shocks.”

The timing of this potential retail slowdown coincides with significant corporate earnings activity, as 13.1% of the S&P 500’s (SP500 [https://seekingalpha.com/symbol/SP500]) market cap is scheduled to report quarterly earnings this week.

Rubner highlighted that U.S. corporate earnings have exceeded expectations, with 85% of reporting companies beating EPS forecasts – well above the 10-year historical average of 74%.

“Confidence and clarity have become key themes of this earnings season,” Citadel Securities observed, while also noting potential for increased share repurchase activity as corporations emerge from blackout periods.

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