In its latest Q4 market outlook, strategist Scott Rubner said investors should be prepared to use further weakness as an opportunity to rebuild equity exposure.
The call comes with the S&P 500 still near record highs, but underneath the index the market looks much weaker. Only about 25% of S&P 500 companies are trading above their 50-day moving average, while the equal-weight index fell 2% during Q3 even as the headline S&P 500 gained 2%.
Earnings Are Getting Stronger, Not Weaker
The main reason for Citadel’s optimism is earnings.
S&P 500 third-quarter EPS estimates have risen 2.2% over the past two months. Normally, estimates fall about 1.9% during that part of the earnings cycle.
Consensus now expects 27% year-over-year EPS growth in Q3 after gains of 20% in Q1 and 32% in Q2.
That strength follows a year in which S&P 500 profits are expected to surge roughly 35%, although analysts see growth slowing considerably in 2027.
At the same time, valuations have reset. The S&P 500 trades around 19 times forward earnings, about 15% below its 2026 peak, while semiconductor valuations have fallen roughly 31% from their high.
$1.3 Trillion in Buybacks Could Return
Another major catalyst is corporate demand.
U.S. companies have authorized a record $1.3 trillion of buybacks through Sept. 29, 8% ahead of last year’s record pace. Most companies are currently restricted by earnings blackout periods, but buyback windows begin reopening around Oct. 15 and expand rapidly into November.
That could provide a new source of demand after September’s surge in Treasury yields put pressure on equity valuations.