To The Moon

At the beginning of last week, the poor non-farm employment in the United States triggered a panic about economic recession, which led to a sharp drop in the U.S. stock market $S&P 500(.SPX)$ $NASDAQ(.IXIC)$ .

By the end of the week, the U.S. stocks had recovered most of the losses.

On Monday, August 12th, the U.S. stock indices opened collectively higher, and ultimately the S&P 500 and the NASDAQ, with the help of chip stocks, closed higher.

Goldman Sachs trader Vani Ranganath pointed out in the weekly report that this is because corporate stock buybacks, as a "supporting force" for the U.S. stock market, are coming.

Currently, 90% of the $S&P 500(.SPX)$ components are in the open window period for buybacks, and it is expected that by the end of this week, this proportion will rise to 93%, which means almost all component companies can buy back their stocks. This open window period will last at least until September 6th.

Goldman Sachs' active capital flow data from the corporate trading desk shows that the average daily trading volume (ADTV) related to stock buybacks for the week of August 5th to August 9th (i.e., last week) was 1.6 times the daily average volume so far this year, a high of 2.1 times the volume so far in 2023, and 1.4 times the volume so far in 2022. Moreover, last week's corporate stock buyback funds were focused on the technology, finance, and non-essential consumer goods sectors.

This indicates that as the U.S. stock buyback window reopens, the volume of buyback transactions has doubled and increased significantly from last week. At the same time, the total amount of stock buybacks authorized by corporate boards so far in 2024 is $819 billion, an increase of about 14% compared to the authorizations so far in 2023.

This represents that in the upcoming buyback window period, the amount of corporate buybacks in the coming days will only be higher, with the flow of funds constituting a short-term positive for the stock market.

Goldman Sachs' technical expert Scott Rubner, who had previously accurately predicted the current market correction, also stated today that with the easing of selling pressure from systematic funds and an increase in stock buybacks by listed companies, investors will have a brief window to buy U.S. stocks at lower prices at the end of August.

In March of this year, Goldman Sachs had forecast that, driven by strong earnings growth from technology companies and a looser financial environment due to Federal Reserve rate cuts, the scale of U.S. stock buybacks would exceed $1 trillion for the first time in history in 2025.

It is expected that the scale of stock buybacks by S&P 500 constituent companies will grow by 13% to $925 billion in 2024, and by 16% to $1.08 trillion in 2025.

The uncertainty of the U.S. presidential election may prompt companies to postpone large-scale stock buybacks until 2025.