More supply than demand

For several years, US equities have benefited from a simple but powerful technical support: companies have bought back more shares than they issued.

This kept net equity supply negative and supported prices, but this support may now start to weaken.

As the chart shows, periods of positive net equity supply have often coincided with more difficult market environments. The examples of 2000, 2009 and 2020 are a useful reminder.

Today, large financing needs linked to AI and growth investments could push issuance higher again. Alphabet’s planned issuance of around USD 85 billion, the potential IPO of SpaceX, and possible future IPOs of major AI companies are good examples of this shift.

Buybacks remain large, but they may no longer be enough to fully offset new equity issuance, especially if capex continues to absorb free cash flow.