Citadel Securities’ Rubner Lifts Bearish Call, Sees March Bounce

As US stock investors endure bouts of volatility in the wake of the US war on Iran, Citadel Securities’ Scott Rubner said his fundamental analysis of the market signals now is a time to turn bullish on equities.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — As US stock investors endure bouts of volatility in the wake of the US war on Iran, Citadel Securities’ Scott Rubner said his fundamental analysis of the market signals now is a time to turn bullish on equities.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.Rubner, who studies positioning and the flow of funds, said washed-out sentiment, supportive seasonality and resilient retail flows have set the stage for a rebound after weeks of choppy trading. The call is an about-face for Rubner, who correctly predicted February would be a weak month for equities. It comes as global markets grapple with the impact from a spike in energy prices and the potential for a protracted war in the Middle East.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.“We take off our tactical bearish call and see scope for a bounce into mid-month, with volatility normalization acting as a catalyst,” Rubner, the firm’s head of equity and equity derivatives strategy, wrote in a note to clients Wednesday. The reversal follows feedback from his global clients and mounting evidence that sentiment has already deteriorated sharply. “The bear camp has become too popular,” Rubner wrote, arguing that positioning now leaves room for a move higher.The S&P 500 Index rose at the open Wednesday after two days of steep early losses that were largely reversed by the end of those sessions. The index is down less than 1% this week, though realized volatility has spiked.Stocks are coming off the worst month since March 2025, and the drawdown left positioning defensive and hedging activity elevated, setting up what Rubner sees as a more favorable risk-reward backdrop should tensions ease.Retail Flows Stay RobustRelentless purchasing from retail traders made January the largest net buying month on record on Citadel Securities’ platform, the strategist said. February, though softer, still ranked fifth in the firm’s history and was the strongest month since April 2021.“Retail remains the strongest hand in the entire market,” Rubner wrote.Famously, that group of investors is loaded with ardent dip buyers who have been driving the intraday rebounds in recent selloffs. Year-to-date, the average net notional dollar value traded has run 2.5 times larger on down days than up days, Rubner said. That ratio surged to 4.3 times in February alone, underscoring the persistence of dip-buying even as volatility climbed.Options activity has stayed equally elevated. Average daily retail options volume this year is running about 14% above 2025 levels and nearly 47% above the 2020–2025 average, he said. That suggests durable participation rather than episodic bursts of speculation.Reset in volatility and FOMO-led rallyAbout $5 trillion notional value of options, or 35% of US options exposure, is set to roll off by March 20, the largest March expiration on record. With much of that positioning coming from call overwriting, option dealers have been selling into rallies to reset hedges.“Moves lower have been absorbed. Moves higher are constrained,” Rubner wrote. “A reset in positioning and volatility could open the door for a more durable re-risking window into April,” he added.

The Cboe Volatility Index reached 28.15 earlier this week, its highest since November. But Rubner sees elevated price swings as a potential tailwind for stocks.“The volatility index is no longer the coach from the sidelines; it is the quarterback,” he wrote.Positioning in the options market could also drive stocks higher. One-month skew on the S&P 500 sits in the 96th percentile of readings going back a year ago, underscoring a heavy demand for downside protection. Should geopolitical risks ease or technology stocks deliver upside catalysts, Rubner expects investors to monetize hedges and add exposure quickly, potentially fueling a fear-of-missing-out rally led by high-quality shares.“The resumption of buying behavior will go back into the old boss: quality tech,” he wrote.Seasonal TailwindsSince 1928, March has delivered positive S&P 500 returns about 61% of the time, averaging roughly 53 basis points, before April, which has been historically the second-best month of the year. Mutual funds can add another layer of support. Average monthly equity mutual fund purchases historically begin to pick up in March, reinforcing improving flows into the second quarter. Rubner also sees tax refunds as another tailwind. While historically a portion of that liquidity initially goes into money market funds, it eventually rotates into risk assets. And this year’s refunds are expected to be larger than usual, potentially amplifying the effect.Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.