Castle Securities believes that after experiencing a round of large-scale stock market deleveraging, systematic buyers are rubbing their hands to prepare to re-enter the market. “The reset of leverage has basically come to an end. Waiting for volatility to decrease will create room for systemic strategies to increase exposure,” said Scott Rubner, head of stock and derivatives strategy at Castle Securities. “The breadth is improving, the correlation is close to historic lows, and investors are more and more willing to pay for the upside.” Castle Securities data shows that August is expected to attract a comeback in buying, as the assets under management of leveraged ETFs plummeted to US$154 billion last month, down nearly 42% from US$218 billion at the end of June. The sector with the biggest decline is semiconductors. Currently, leveraged ETFs hold about US$31 billion in related assets. The company said the potential for a rebound is building up. “The next wave of substantially impactful mechanical capital flows may be re-leveraged rather than deleveraged,” Rubner wrote in the research report. He also said retail investors are returning and became net buyers on the company's platform last week, but they are still spending money to buy downside protection. At the same time, the end of the earnings season means that the window for corporate stock buybacks will soon be reopened.

Castle Securities believes that after experiencing a round of large-scale stock market deleveraging, systematic buyers are rubbing their hands to prepare to re-enter the market. “The reset of leverage has basically come to an end. Waiting for volatility to decrease will create room for systemic strategies to increase exposure,” said Scott Rubner, head of stock and derivatives strategy at Castle Securities. “The breadth is improving, the correlation is close to historic lows, and investors are more and more willing to pay for the upside.” Castle Securities data shows that August is expected to attract a comeback in buying, as the assets under management of leveraged ETFs plummeted to US$154 billion last month, down nearly 42% from US$218 billion at the end of June. The sector with the biggest decline is semiconductors. Currently, leveraged ETFs hold about US$31 billion in related assets. The company said the potential for a rebound is building up. “The next wave of substantially impactful mechanical capital flows may be re-leveraged rather than deleveraged,” Rubner wrote in the research report. He also said retail investors are returning and became net buyers on the company's platform last week, but they are still spending money to buy downside protection. At the same time, the end of the earnings season means that the window for corporate stock buybacks will soon be reopened.