US stocks are primed for a year-end rebound as the midterm election removes uncertainty, corporate earnings remain resilient, and light investor positioning leaves room for buying, according to Citadel Securities’ Scott Rubner. The Nasdaq 100 entered its third correction of the year, falling 10% from its early-October peak over concerns about AI investment returns. Hedge funds have cut US equity exposure and increased bearish bets, while systematic investors reduced market exposure.
Rubner notes that light positioning, combined with renewed stock buybacks, persistent retail buying, and favorable post-midterm seasonality, creates a compelling setup. Retail investors have bought US equities for 22 consecutive sessions, accumulating nearly $33 billion. Systematic funds may provide support as positioning is at its lowest since March.
Volatility dynamics may encourage risk rebuilding, and corporate buybacks are set to surge as blackout periods expire. Since 1950, Q4 of midterm years has been the strongest, with the S&P 500 averaging a 5.6% gain.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing