SUPERNEWS

Macro

Corporate Buybacks to Propel Stock Rally with $934B Plan

Goldman Sachs predicts a robust stock market rally fueled by $934 billion in corporate buybacks, led by big tech.

By Bill Bullington

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5/7, 12:42 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
Apple Inc.
Alphabet Inc.
Goldman Sachs Group, Inc.
Meta Platforms, Inc.
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Key Takeaway

  • Goldman Sachs predicts a surge in US equity buybacks, estimating $934 billion for 2024, with a significant portion in May and June.
  • Apple Inc. leads with an unprecedented $110 billion repurchase plan, followed by Alphabet Inc.'s $70 billion and Meta Platforms Inc.'s $50 billion.
  • These corporate buybacks are expected to bolster the stock market rally amidst higher-for-longer interest rate policies by the Federal Reserve.

Corporate Buybacks Fuel Rally

American companies are spearheading a significant phase in the stock market rally, with Goldman Sachs Group Inc. highlighting the role of corporate buybacks in this upward trend. An estimated $934 billion in share repurchases for 2024, with a substantial portion, about a sixth, expected to be executed in May and June, underscores the magnitude of this activity. Already, more than $550 billion in buyback authorizations have been reported this year, indicating a robust commitment from corporations to bolster their stock prices.

Big tech companies are leading the charge, with Apple Inc. announcing an unprecedented $110 billion buyback plan, the largest in U.S. history. This move alone sparked the best performance day for Apple's stock in 18 months. Alphabet Inc. and Meta Platforms Inc. have also announced significant buyback programs, totaling $70 billion and $50 billion, respectively. These massive repurchases are seen as pivotal in sustaining the stock market's momentum, especially as the Federal Reserve signals a more prolonged period of high-interest rates to combat persistent inflation.

Seasonal and Momentum Traders' Influence

The stock market is entering a period characterized by favorable seasonal trends, according to Scott Rubner of Goldman Sachs. This period not only benefits from corporate buybacks but also sees an uptick in activity from momentum traders and retail investors, particularly during the summer months. Commodity trading advisers (CTAs), known for their momentum-driven strategies, are expected to increase their stock purchases in the coming week, regardless of market direction.

This bullish sentiment is further bolstered by an anticipated surge in demand for fixed income, which, according to Rubner, is a positive sign for equity investors, especially those eyeing Nasdaq stocks. The combination of corporate buybacks, momentum trading, and increased retail participation paints a promising picture for the stock market's near-term trajectory.

Fixed Income's Role in Equity Markets

The interplay between fixed income demand and equity market dynamics is a critical factor to watch. As investors seek massive opportunities in fixed income, this shift is likely to have a ripple effect on equities, particularly for technology and growth stocks that dominate the Nasdaq. The expectation of a significant move towards fixed income investments could provide the necessary confidence for investors to increase their stakes in equities, further fueling the stock market rally.

Street Views

  • Scott Rubner, Goldman Sachs Group Inc. (Bullish on US equities):

    "About a sixth of the $934 billion in estimated share repurchases this year are expected get executed in May and June... More than $550 billion worth of authorizations have already been done by companies so far this year."