Are US equities approaching a “blow-off” top ahead of the traditional late-summer vol expansion and September’s challenging seasonal for the S&P?

That’s the question. Answers vary.

Regular readers can probably recite the narrative from memory by now. Vol, both implied and realized, tends to bottom in late-July before turning up in August when liquidity’s lacking and markets are accordingly thin. Then, in September, investors come back from Labor Day to stare down what, historically, is the worst month of the year for US stocks.

There are plenty of reasons to suspect history will rhyme, if not repeat, in 2025. Next week’s a trial by fire on the US macro and earnings fronts, and although it looks like the Trump administration’s keen to wrap up deals (or “deals,” in scare quotes) with most of America’s important trade partners by the August 1 tariff “deadline” (more scare quotes), the odds of that deadline coming and going with no additional drama are infinitesimal. This is Donald Trump we’re talking about.

And then there’s the July FOMC gathering after which Jerome Powell, assuming he’s still Fed Chair, won’t be able to parry questions about the pressure campaign to facilitate his early retirement. The days of Powell ignoring the orange elephant in the room during his post-meeting press conferences are over. It’s very likely that Chris Waller and Miki Bowman dissent next week assuming the Fed doesn’t cut. If they do cut, it’ll look like exactly what it is: A fold to Trump, and a loss of independence.

When you consider all of that together — the macro bonanza which includes July’s job report, earnings from the rest of the Mag7 minus Nvidia, any fireworks around the FOMC and the tariff deadline — there’s plenty of dry kindling scattered about just waiting on a match.

So, yeah. If the question’s whether there’s scope for the vol seasonal to “do its thing,” so to speak, the answer’s “absolutely,” and maybe ahead of schedule. But as Citadel’s Scott Rubner reminded investors mid-week, there’s still some left in the tank for the July seasonal.

“Looking at the past 100 years, the S&P tends to base around this week before heading higher into month-end, consistent with number of vacation schedules, pool parties and a general unwillingness to put on a new short,” he wrote.

The figure on the left shows you the S&P seasonal, while the figure on the right’s a reminder that if past is precedent, an inflection point for implied vol’s imminent.

For now, the ongoing grind lower in realized vol — discussed here on too many occasions to plausibly enumerate — continues to drive mechanical equity demand from the target vol universe. That’s a key support pillar. As Rubner put it, “lower volatility readings continue to be a major input as the decline in realized volatility may signal continued non-fundamental, rules-based equity demand.”

At the same time, retail investors are exhibiting their stereotypical penchant for buying both dips and rips. If stocks are lower, they see a bargain. If the tape’s bullish, FOMO sets in. Through Wednesday, Citadel’s data suggested the retail set was a buyer of cash equities for a 19th straight session, the longest such streak since the go-go “stimmy” days of 2021. Institutional investors, on the other hand, “have been bearish in eight of the past 10 weeks,” Rubner remarked.

The figure below’s amusing. It’s from Jim Bianco. I’ve been saving it since last week. It shows the ratio of Goldman’s retail investor favorite index to the Solactive Guru Index, which tracks top hedge fund holdings.

The implication, obviously, is that the retail crowd’s outperformed the “smart money” pretty handily since the April lows. (As you might’ve heard, the meme stock frenzy’s back.)

“While retail traders were scooping up shares at discounts post-‘Liberation Day,’ professional money managers were fleeing equities,” Bianco wrote. “‘Dumb money’ isn’t so dumb in 2025.”

As I never tire of reminding readers, “dumb” money, to the extent that means making a habit of putting small amounts to work buying pullbacks in blue-chip companies and holding those stakes for the long run, is never “dumb.” That $500 — or whatever — you throw at every 5% dip may be funny right now, to the pompous, but you’ll be the one chuckling when, after 40 years of dip-buying and dividend reinvesting, the balance in your once “laughable” self-managed retirement fund has seven figures and two commas.

Anyway, Citadel’s Rubner said he’s still “on watch for daily all-time highs” but, coming full circle, he’s also “on alert for a ‘blow-off’ top” in light of recent retail interest in rally laggards and high-risk corners of the market. For now, he wrote, “the pain trade remains higher.”

Separately, JPMorgan’s trading desk said even clients who “skewed bearish are throwing in the towel.” Stocks, the bank suggested, could “take a significant step higher” in the event next week’s data deluge is favorable and Trump comes to amicable trade terms with Europe and, eventually, China.