GOLDMAN Sachs expects US share buybacks to exceed US$1 trillion for the first time in 2025, driven by strong earnings growth from technology companies and looser financial conditions as the Federal Reserve looks to cut interest rates.

The Wall Street bank, in a note dated Mar 6, said it expects 16 per cent growth in share repurchases from S&P 500 companies to US$1.08 trillion in 2025, following a 13 per cent rise to US$925 billion in 2024.

“Earnings growth is the most significant driver of share repurchases at the index level,” Goldman US equity strategists led by Cormac Conners and David Kostin, said expecting megacap companies to pull much of the weight.

Companies typically buy back their shares when they are feeling confident about the future and view their stock prices as undervalued.

With a 7 per cent gain year-to-date, the benchmark S&P 500 is trading near record levels, driven by frenzy around artificial intelligence and bets of falling US interest rates. Some major banks see more room for the index to run higher.

Goldman’s strategists noted that rapid revenue growth at US technology firms should be enough to fund AI investments in the coming years without hindering returns to shareholders.

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They also added that US election uncertainty could prompt companies to postpone large buybacks until 2025.

Goldman earlier modeled a 4 per cent annual rise in companies buying back their own shares in 2024, rebounding from a 14 per cent fall last year, the second-largest decline since the 2008 global financial crisis. REUTERS