Understanding the Flow of Corporate Buybacks: Implications for Investors the Rest of 2024
In 2024 U.S. corporate stock buybacks have reached unprecedented levels, making them an essential consideration for investment managers pursuing asymmetric returns. The latest insights from Goldman Sachs* reveal that buyback activity, led by U.S. corporates, remains a significant force in the equity markets, promising to influence the market dynamics through year-end and beyond.
Record-Setting Buyback Authorizations
Corporate buybacks, where companies repurchase their own shares, reduce the supply of available stock and can bolster share prices. This year, U.S. corporations have authorized an astonishing $1.009 trillion in buybacks, setting a new record and surpassing 2022’s previous high. Interestingly, 2024 has seen fewer buyback authorizations in count, with just 904 to date versus 1,096 in 2022. This suggests that companies are focusing on larger individual buybacks, magnifying the impact of each transaction.
Such hefty buybacks suggest a potential asymmetry in the market as corporations signal confidence in their stock valuations. For investment managers focused on asymmetric returns, it can offer a favorable backdrop, enhancing the potential for high-return equity positions.
The Buyback ‘Super Bowl’: A Look at Seasonal Execution Patterns
The timing of buybacks can be just as influential as their volume. Currently, we are nearing the end of a corporate blackout window—periods when companies are restricted from repurchasing shares around earnings releases. This window is set to lift on October 28, coinciding with a major wave of quarterly earnings reports, representing around 37% of the S&P 500’s market cap.
Historically, November has been the peak month for buyback execution, with an expected 10.4% of annual buyback spending typically occurring in November. Goldman Sachs projects $100 billion in corporate buybacks during November alone, creating a robust base of demand that may bolster equity prices even amid seasonal liquidity challenges surrounding Thanksgiving and holiday vacations.
For investment portfolio managers, this seasonal uptick represents a potential opportunity to capitalize on positive asymmetry. The increased buyback activity could stabilize markets or even lead to upward momentum, creating potential gains as corporations re-enter the market with “dry powder.”
Looking to 2025: The Corporate Buyback Outlook
Goldman Sachs anticipates that 2025 will continue the trend, projecting S&P 500 gross buybacks to hit $1.070 trillion. For asymmetric return-driven managers, this forecast further supports strategies aimed at harnessing the positive asymmetry corporate buybacks create in the equity market, particularly as companies continue to reallocate capital to shareholder returns at historic levels.
Implications for Investment Strategy
In the coming months, corporate buybacks are likely to shape equity demand, providing both a potential floor and catalyst for year-end rallies. As investors, understanding this flow of funds is critical for identifying opportunities with asymmetric potential, particularly in an environment where companies are voting with their wallets on their own stock’s value.
For those managing investments with an eye toward positive asymmetry, corporate buybacks present a unique tailwind, offering both demand support and potential appreciation during historically favorable periods.
*Goldman Sachs is the broker and independent custodian for Shell Capital Management, LLC, a registered investment adviser.