US Stocks' July Plunge Not the End of the Bull Market! Citadel: Market Completes 'Technical Reset,' 4 Reasons Why August Will See Continued Gains

This summer, U.S. equities experienced sharp volatility, but market observers note that July's turbulence did not truly end the ongoing bull run—in fact, it may have strengthened market fundamentals.

According to a report by Business Insider, Scott Rubner, Head of Equity and Derivatives Strategy at Citadel Securities, stated in a recent report that market conditions have clearly improved as August trading begins, following last month's rollercoaster ride.

Rubner emphasized that while many investors felt uneasy about July's extreme swings, he interprets this volatility as a bullish signal.

He stressed that the global market's "technical reset" is largely complete—achieved through capital rotation, deleveraging, and strengthening fundamentals—not due to deteriorating macroeconomic conditions.

The report outlines four reasons why August's market environment could stabilize and allow the bullish trend to continue.

Retail Investors Are Becoming More Discerning

Recent trading data shows a shift in retail investor behavior, indicating that short-term traders are becoming more cautious and selective in their stock picks.

In response to July's market swings, retail investors reduced exposure to certain high-growth tech stocks.

Rubner pointed out that during the intense volatility in tech and AI-related stocks in July, retail investors didn’t exit the market—they adjusted their holdings, helping absorb some of the overheated positions accumulated earlier, thus laying the foundation for a new phase of market growth.

As a result, future market performance will be driven more by corporate earnings and fundamentals rather than speculative momentum.

Leverage Positions Have Clearly Cooled Down

Leveraged trading has recently drawn significant attention. Margin calls in South Korea triggered waves of retail selling, and the well-known hedge fund Situational Awareness sold off its equity portfolio partly due to losses from highly leveraged positions.

However, Rubner noted that retail investors’ recent large-scale net selling—especially of high-risk leveraged ETFs—has significantly lowered overall market leverage.

He said: "Assets in leveraged ETFs have shrunk by over $60 billion from their June peak, eliminating one of the major incremental sources of leverage that fueled the first-half stock rally."

Rubner added: "The most pronounced capital withdrawals have been concentrated in the market’s most crowded themes. Tech-focused leveraged ETFs saw assets shrink by about 40% in the past month, while semiconductor-focused leveraged ETFs declined nearly 55%."

The Nature of Volatility Has Changed

Rubner noted that although July’s market was volatile, the actual situation may have been more intense than what major indices suggest, as individual stocks experienced wild swings, sharply increasing the cost of hedging specific stocks and sectors.

Yet, in his view, strong performance in other areas of the tech sector has offset the impact of heavy outflows from chip stocks.

Rubner stated: "So far this year, when the Philadelphia Semiconductor Index (SOX) dropped more than 3% in a single day, the S&P 500 only fell an average of 0.8%—far below the historical 20-year average decline of 2.4%. At the same time, software stocks on average still posted gains, something not seen since at least 2001."

Fundamentals Regain Control

Although volatility dominated July’s market, Rubner’s team believes the environment is gradually shifting, allowing investors to refocus on fundamentals—particularly the robust corporate earnings revealed in the latest earnings season.

Rubner said: "The consensus expectation for S&P 500 second-quarter earnings growth has been revised upward from 22.4% at the start of earnings season to around 45% now. This will be one of the strongest earnings seasons in recent years, excluding recovery periods following recessions."

He further noted that what makes this earnings season remarkable isn’t just the high beat rate, but the magnitude by which companies are exceeding expectations—far greater than in previous quarters.