With stronger-than-expected growth in earnings for mega-cap tech companies, Goldman Sachs has increased its share buyback projection for companies in the S&P 500 (.SPX) index, with repurchases pegged to rise 13% to $925 billion in 2024.
Companies' share repurchases fell 14% last year, the second-biggest drop since the global financial crisis of 2008, while the Wall Street brokerage had anticipated a 4% yearly increase.
Goldman Sachs strategists predicted in a note on Wednesday that the IT and telecoms services industry will be the primary driver of buybacks, with mega-cap IT corporations likely to post greater margins and profits.
S&P 500 repurchase increase for the year is expected to be "substantial" and driven by the so-called Magnificent Seven stocks, according to the strategists.
Companies may be able to boost their repurchase payouts this year, they said, despite the fact that aggregate buybacks for the group declined 11% in 2023, the slowest since 2017.
"Improvements in the broader macro environment since the fall, like the decline in Treasury yields, also help to inform our forecast upgrade."
According to Cormac Conners, a U.S. equities strategist at Goldman Sachs, share buybacks will be supported by robust earnings, but they will face challenges from elevated valuations and policy uncertainties around the November U.S. general elections.
Goldman predicts that share repurchases would reach a new record high of over $1 trillion in 2025, driven by solid earnings and the removal of policy uncertainty brought about by the presidential elections.
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