Goldman Sachs predicts increased buyback forecast for 2024 and 2025

Goldman expects buybacks to continue to rise in 2025, reaching $1.075 billion. "Earnings growth is the primary driver of share repurchases at the index level, accounting for about half of the year-over-year variation," said strategist Cormac Conners.

"We have recently upgraded our earnings per share forecasts for 2024 and 2025 due to the improving economic environment and stronger-than-expected margins and earnings in mega-cap tech companies." Conners also highlighted the impact of macroeconomic conditions on the buyback forecast, noting that factors like declining Treasury yields have contributed to the upgrade. Despite expectations of elevated Treasury yields, Goldman anticipates that looser lending conditions will be driven by Fed easing in the coming years.

Tech and communication services companies are expected to be the primary drivers of buyback growth at the index level, with Info Tech and Communication Services sectors leading the way. However, weakness in Energy buybacks may offset some of this growth. Conners pointed out that the "Magnificent 7" - including companies like AAPL, AMZN, and MSFT - are likely to fuel a significant portion of S&P 500 buyback growth.

Although there is a risk of dividend initiations impacting buyback growth for some companies, Conners emphasized that buybacks will likely remain the primary cash return strategy for large tech stocks due to their flexibility and tax efficiency. Overall, Goldman Sachs remains optimistic about share repurchases in the coming years, driven by strong earnings growth and favorable economic conditions.