Citadel Strategist: U.S. Stocks May Rise After Reset

Key Moments

The S&P 500 forward P/E is around 19.7 times, below its 5-year average of 20.1 times and at its lowest level since April 2025’s Liberation Day.
The Nasdaq 100 forward P/E has dropped to about 21.7 times, under its 10-year average of 22.8 times and near the bottom of its 1-year range.
The Nasdaq 100 – S&P 500 forward P/E spread has narrowed to roughly 2.0 times, the tightest level since December 2018, historically coinciding with outperformance by the Nasdaq 100.

Valuation Reset Across Major U.S. Equity Benchmarks

Valuations in U.S. equities have pulled back meaningfully, placing both the S&P 500 and Nasdaq at the lower end of their recent trading ranges, according to Scott Rubner, Head of Equity and Equity Derivatives Strategy at Citadel Securities.

The S&P 500 forward price-to-earnings ratio is around 19.7 times, below its 5-year average of 20.1 times. On a 1-year basis, this level ranks in the 6th percentile and marks the lowest reading since April 2025’s Liberation Day.

Rubner notes that historically, when the S&P 500 forward P/E has fallen below 20 times, subsequent returns have tended to be constructive. Since 2020, he observes 13 occasions when the index slipped under this threshold. Over the following 30 days, the S&P 500 posted an average return of 3.5%, a median return of 6.4%, and delivered positive performance 75% of the time.

Nasdaq 100 Valuations Move Below Long-Term Average

The Nasdaq 100 has also seen a notable valuation reset. Its forward P/E has retreated to about 21.7 times, dropping under its 10-year average of 22.8 times and moving close to the lowest levels observed over the past year.

On a 1-year view, the Nasdaq 100 forward P/E sits in the 2nd percentile, while on a 5-year horizon it is in the 13th percentile, highlighting how compressed current valuations are relative to recent history.

Narrowing Spread Between Nasdaq 100 and S&P 500

The valuation gap between the growth-heavy Nasdaq 100 and the broader S&P 500 has tightened sharply. The forward P/E spread between the two indices is now about 2.0 times, which Rubner characterizes as its narrowest point in more than seven years, dating back to December 2018. This spread currently lies in the bottom quintile of its 10-year range, and it closed below 2 times on Friday.

Rubner points out that over the past 20 years, there have been 30 instances when this spread fell below 2 times. In the 30 trading sessions after such occurrences, the Nasdaq 100 generated both average and median returns of 2.7%, with gains recorded 76% of the time. During these windows, the Nasdaq 100 also consistently outpaced the S&P 500, he adds.

Key Valuation and Performance Statistics

Metric	Value / Observation	Context
S&P 500 forward P/E	19.7 times	Below 5-year average of 20.1 times; 6th percentile of 1-year range
Historical S&P 500 forward P/E < 20 times (since 2020)	13 instances	Average 30-day return 3.5%; median 6.4%; positive 75% of the time
Nasdaq 100 forward P/E	21.7 times	Below 10-year average of 22.8 times; 2nd percentile (1-year), 13th percentile (5-year)
Nasdaq 100 – S&P 500 forward P/E spread	Approximately 2.0 times	Narrowest since December 2018; bottom quintile of 10-year range
Historical spread < 2 times (20-year lookback)	30 instances	Nasdaq 100 average and median 30-day return 2.7%; up 76% of the time; outperforms S&P 500

Volatility Elevated but Easing in Key Tech Names

Rubner also highlights shifting dynamics in volatility. While overall volatility remains high, it has begun to moderate. For the Invesco QQQ Trust (QQQ), 1-month at-the-money implied volatility is in the 85th percentile of its 1-year range, down from the 93rd percentile on Friday.

In several large-cap technology stocks, 25-delta call implied volatility has fallen toward the low end of the past year’s observations. NVIDIA’s 1-month 25-delta call implied volatility is currently in the 3rd percentile of its 1-year range. NVDA accounts for roughly 8% of the SPDR S&P 500 ETF Trust (SPY), where 1-month 25-delta call implied volatility is in the 90th percentile.

Comparable patterns appear across other prominent technology names. Tesla’s 1-month 25-delta implied volatility is positioned in the 6th percentile of its 1-year range, Palantir in the 10th percentile, Google in the 20th percentile, and Broadcom in the 25th percentile.