"A
surge in share buybacks and continued growth in cash mergers and
acquisitions (M&A) will be the primary drivers of corporate
equity demand," Cormac Conners, U.S. equity strategist at
Goldman, said in a note dated March 21.
Earlier this month, the Wall Street bank said it expects S&P 500
companies' share repurchases to jump 13% to $925 billion this
year, and then top $1 trillion next year.
Goldman cautioned that equity issuances this year will offset
some of the purchases.
However, a much bigger offset, it estimated, would come via
mutual funds and pension funds selling $300 billion and $325
billion of stocks, respectively, on a net basis.
The outflows in mutual funds will come as investors flock to
passive index funds and exchange-traded funds (ETFs), from
actively managed ones, while pension funds will rotate capital
towards lower-risk assets such as bonds, Conners said.
Moreover, the Presidential elections in November, the brokerage
estimated, will lead to foreign investors offloading $50 billion
worth of U.S. stocks this year, in stark contrast to last year
when they bought stocks worth $179 billion.
"The U.S. is the global safe haven ... However, domestic
uncertainty is likely to rise in conjunction with the
Presidential election later this year," Conners said.
Besides corporates themselves, U.S. households will be the other
group who will be net buyers of domestic stocks -- worth $100
billion -- this year, reversing course from being net sellers in
2023, the brokerage said.
The record $3.8 trillion households own in money market assets
means they have ample funds, Conners said, but cautioned that
the continuing allure of credit and elevated equity allocations
could act as dampeners.
(Reporting by Roshan Abraham and Siddarth S in Bengaluru;
Editing by Janane Venkatraman and Savio D'Souza)
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