Baba Neal

After liquidating Leo, Citadel just published a 15 page bullish thesis on the state of the markets lol I will post an summary below for my #stonkdata fans Citadel Market Update Summary Core Message Positioning has normalized. Fundamentals matter again. July delivered a meaningful technical reset through rotation, deleveraging, and stronger fundamentals — not a deterioration in the macro backdrop. The structural bull market remains intact. July reset it rather than ended it. Key Points 1. Retail Behavior Shifted Hard • Retail volumes moderated from May/June extremes but stayed elevated. • Behavior flipped: Retail went from buying weakness in high-conviction AI/semi names to aggressive selling. • Culminated in the largest week of retail equity selling since 2022. • Especially extreme in Technology (semis + memory) and then Software. Multiple record or near-record retail sell days occurred this week. 2. Leverage Cleaned Up Significantly • Leveraged ETF AUM dropped >$60B from the June peak. • Tech leveraged ETFs down ~40%, Semiconductor leveraged ETFs down ~55%. • Semiconductor weight in the S&P 500 fell from nearly 20% to ~16%. • Equity financing spreads collapsed from 138 bps to ~50 bps above SOFR → leverage demand has normalized. 3. Volatility Regime Improving • Single-stock volatility was elevated while index volatility stayed suppressed (low correlations + sharp rotations). • That gap is now narrowing. • Semiconductor implied vol (which traded at a wide premium to realized) has started normalizing. This should improve liquidity and lower hedging costs. 4. Fundamentals Taking the Wheel • Earnings season has been strong: high beat rates + companies delivering well above already elevated expectations → one of the steepest positive revision paths on record. • Stronger earnings have coincided with valuation compression (S&P IT sector now near 1-year lows and well below its 10-year average). • Corporate buybacks are about to re-accelerate. Currently only ~45% of S&P weight is eligible to buy back stock → rises to ~75% by end of next week and ~85% by mid-August. August is typically one of the heaviest buyback months. Bottom Line Citadel’s view: The heaviest part of the summer technical reset is largely behind us. Positioning is cleaner, leverage has come down, concentration has declined, and funding conditions have improved. At the same time, earnings remain strong, valuations are more attractive, and corporate demand (buybacks) is set to pick up. They remain constructive on the medium-term outlook. The structural pillars of the bull market (retail participation, passive ownership, corporate demand) are still intact.