Citadel Warns of Deteriorating Risk-Reward Outlook for Stocks as September Begins
As the historically challenging month of September begins, Citadel Securities' head of equity and derivatives strategy Scott Rubner warns that the near-term risk-reward balance in equities is shifting. While maintaining a long-term bullish stance on stocks, he highlights factors such as earnings season timing, reduced corporate buybacks due to blackout periods, seasonal trends, and retail trading behavior contributing to increased caution. The S&P 500 reached an intraday record high earlier this month after strong August performance but has since stalled. Volatility, measured by the Cboe VIX index, fell to its lowest level of the year at 14.1 last week. Single-stock volatility and spreads between sector-specific volatilities have also declined significantly compared to historical levels. According to Citadel's analysis, downside protection is currently inexpensive given compressed volatility risk premiums in tech stocks following strong earnings reports like NVIDIA’s recent results.
Topics: buybacks equity derivatives strategy S&P 500 seasonality VIX