Record High Expected for U.S. Corporate Equities Demand
Increased Corporate Equity Demand
U.S. companies are predicted to reach a six-year high in purchasing domestic equities through stock buybacks and corporate acquisitions, totaling $625 billion this year. This amount equals the combined offloading of mutual funds and pension houses, as highlighted by Goldman Sachs.
Driving Factors
Goldman Sachs’ U.S. equity strategist, Cormac Conners, attributes this surge in corporate equity demand to a rise in share buybacks and continuous growth in cash mergers and acquisitions (M&A).
Future Projections
According to the Wall Street bank, share repurchases are expected to increase by 13% to $925 billion this year, with estimates surpassing $1 trillion next year. However, equity issuances may offset some of these purchases.
Market Trends
Mutual funds and pension funds are projected to sell $300 billion and $325 billion of stocks, respectively, on a net basis. This shift is influenced by investors gravitating towards passive index funds and ETFs, while pension funds are reallocating capital towards lower-risk assets like bonds.
Foreign Investor Behavior
Goldman anticipates that foreign investors will offload $50 billion worth of U.S. stocks this year, primarily due to the uncertainty surrounding the upcoming Presidential elections in November.
Household Investments
U.S. households are expected to be net buyers of domestic stocks, amounting to $100 billion this year. This reverses the trend from 2023 when households were net sellers. The substantial $3.8 trillion held by households in money market assets provides them with ample funds for investment.
Market Dynamics
Despite the available funds, the continuing appeal of credit and high equity allocations could potentially dampen the enthusiasm for stock purchases among U.S. households.
