After seven consecutive gains in the US stock market, the risk of a pullback has increased. Citadel Securities warns that weakening US bonds are reducing the attractiveness of stocks, and the momentum of capital is gradually weakening.

As the US stock market continues to hit new historical highs, Citadel Securities has started to issue warnings about the short-term outlook for the market. Scott Rubner, head of stock and stock derivative strategies at the company, stated that the momentum driving the recent gains in the US stock market is gradually weakening, and the short-term risk of a market pullback is increasing. Since the low point in March this year, the S&P 500 index has risen by about 16%, benefiting from strong corporate earnings, large-scale stock buybacks by listed companies, and continued buying by retail investors. However, Rubner pointed out in the latest client report that despite the still strong fundamentals, there are signs of the market becoming "overheated", and the continuous rise in long-term US Treasury yields is starting to pose competition to stocks. He stated, "The current short-term market environment requires more caution." Rubner believes that many of the key fund flows that have driven the rise in the US stock market have now entered a relatively late stage. Meanwhile, the US stock market has been rising for seven consecutive weeks. During this period, investors have largely ignored the escalation of conflict in the Middle East, international oil prices surpassing $100 per barrel, escalating inflation concerns, and expectations in the market for the Federal Reserve to potentially raise interest rates again. However, Rubner points out that the market structure is now noticeably more crowded than six weeks ago. On one hand, both retail and institutional investors continue to increase their holdings in stocks; on the other hand, the 30-year US Treasury bond yield is lingering near its highest level in nearly three years, weakening the attractiveness of stock assets. Furthermore, he also warns that this rally is still highly concentrated. Data shows that in the past 30 trading days, only 27% of S&P 500 component stocks outperformed the index, meaning that the majority of the gains have been driven by a few large tech stocks. Rubner also points out that the market's ability to defend against short-term volatility events has significantly decreased. Compared to a few weeks ago, investors' hedging positions against market declines have noticeably decreased. He states that passive fund inflows, corporate buybacks, retail participation, and leveraged ETF fund allocations have all accelerated in sync with the market rally, but these fund flows could also become important sources of risk for short-term market pullbacks in the future. Rubner warns that once the momentum of the market rally starts to weaken, these fund flows may experience a concentrated reversal, exacerbating market volatility.