Goldman Sachs raises 2024 stock buyback forecast for S&P 500 companies

Stock buyback forecast: Goldman Sachs has revised its forecast for share buybacks by companies in the S&P 500 index, projecting a 13 per cent increase to $925 billion in 2024. This adjustment comes on the heels of stronger-than-expected earnings growth among mega-cap tech firms, signaling optimism in the market.

Previously, the Wall Street brokerage had anticipated a modest 4 per cent annual rise in buybacks, following a 14 per cent decline in 2023, which marked the second-largest drop since the 2008 global financial crisis.

According to strategists at Goldman Sachs, the surge in buybacks will be primarily fueled by the information technology and communications services sectors. Mega-cap tech stocks are expected to drive significant margin and profit growth, contributing substantially to S&P 500 repurchases throughout the year.

The so-called "Magnificent Seven" stocks are poised to play a crucial role in this trend, driving a substantial portion of the anticipated buyback growth in 2024.

Despite a slight 11 per cent decline in aggregate buybacks among these top-performing firms in 2023—the slowest pace since 2017—companies may have the capacity to ramp up their buyback payouts in the current year.

Cormac Conners, U.S. equity strategist at Goldman Sachs, highlighted that while solid earnings serve as a primary tailwind, elevated valuations and policy uncertainty surrounding the November U.S. general elections could pose challenges to share buybacks.

Looking ahead to 2025, Goldman Sachs anticipates that share repurchases will surpass $1 trillion for the first time.

(With Reuters inputs.)