Citadel Securities strategist Scott Rubner expects retail investors to return to the US stock market in the fourth quarter. The firm, which processes approximately 35% of retail trades, describes the current period as a reload phase following a market reset in September. Retail trading volume in September dropped to 0.94 times its one-year average, marking the lowest level of 2026 and a 26% decline from the June peak.
Corporate share buyback windows are scheduled to reopen on October 15, following the earnings blackout period. Meanwhile, model-driven funds have reduced their equity exposure to the bottom fifth of their range since 2024. Analysts anticipate a 27% increase in S&P 500 earnings per share for the current quarter, with Goldman Sachs dismissing concerns regarding a potential earnings bubble.
Historical data since 1930 shows that the S&P 500 has averaged a 5.6% gain during the fourth quarter of midterm-election years, compared to a 2.9% average in other years. However, market lows occurred in October in 14 of those 23 years. Recent economic indicators show US employers added 29,000 jobs in September, falling short of the 84,000 forecast, while the unemployment rate reached 4.2%.
The market rally remains narrow, as most S&P 500 stocks declined in September despite a slight increase in the index. Citadel Securities notes that while September reduced leverage and positioning, the fourth quarter introduces new earnings reports and catalysts. The first significant test for this market outlook is expected to take place on October 15.
