Goldman: Upgrading our 2024 S&P 500 buyback forecast
S&P 500 repurchases fell 14% in 2023, the second largest annual decline since the Global Financial Crisis. Executed buybacks totaled $815 billion for the full year. A lack of earnings growth, the high cost of capital, and elevated macro uncertainty were the primary reasons for the decline. Declines in Health Care, Info Tech, Financials, and Consumer Staples accounted for nearly 90% of the drop. Despite stellar earnings growth, repurchases by the Magnificent 7 fell for the first time in five years (-11%).
We forecast S&P 500 companies will repurchase $925 billion in stock in 2024 (13% yr/yr growth) and $1,075 billion in 2025 (16% growth). We had previously forecast S&P 500 buybacks would grow 4% in 2024. Earnings growth is the most significant driver of share repurchases at the index level, explaining about half of the year-to-year variation.
We recently upgraded our EPS forecasts for 2024 ($241 EPS, 8% growth) and 2025 ($256, 6% growth) due to the improving economic growth environment and stronger than previously expected mega-cap tech margins and earnings. Improvements in the broader macro environment since the fall, like the decline in Treasury yields, also help to inform our forecast upgrade.