Goldman Sachs lifts stock buyback forecast for S&P 500 companies

Goldman Sachs has raised its share buyback forecast for companies in the S&P 500  index, with repurchases pegged to rise 13% to $925 billion in 2024, driven by stronger than expected mega-cap tech earnings growth.

The Wall Street brokerage had earlier expected a 4% annual rise in companies buying back their own shares, against a 14% fall last year, which was the second-largest decline since the 2008 global financial crisis.

Buybacks will be driven by information technology and communications services sector, with mega-cap tech stocks expected to post stronger margins and profits, strategists at Goldman Sachs said in a note on Wednesday.

The so-called Magnificent Seven stocks are likely to drive "substantial" portion of S&P 500 repurchase growth in the year, the strategists said.

Even though aggregate buybacks for the group fell 11% in 2023, the slowest since 2017, companies may have capacity to increase their buyback payouts this year, they noted.

"Improvements in the broader macro environment since the fall, like the decline in Treasury yields, also help to inform our forecast upgrade."

While solid earnings will be the primary tailwind, elevated valuations and policy uncertainty surrounding November U.S. general elections would pose headwinds to share buybacks, Cormac Conners, U.S. equity strategist at Goldman Sachs, said.

For 2025, Goldman expects share repurchases to exceed $1 trillion for the first time, as earnings would remain strong, while the outcome of presidential elections will remove policy uncertainty.