The global stock market is facing a supply shortage as fewer companies go public and buyback programs surge, according to a recent analysis by JPMorgan. The net issuance of new stock by global companies has turned the most negative since 1999, with more than $1 trillion worth of stocks being removed from global markets every year through corporate stock buybacks.
Ritholtz Wealth Management CEO Josh Brown highlighted the impact of this trend, stating that globally, $1.2 trillion worth of stocks are being removed from the markets annually due to buybacks. This ongoing decline in the supply of stocks, coupled with a tepid IPO market and fewer secondary equity offerings, is creating a scarcity of stocks available for investors to purchase.
Brown emphasized that as long as demand for stocks remains constant or increases, stock prices should continue to rise. He pointed out that private equity firms are also sitting on about $2 trillion worth of dry powder waiting to be invested, further reducing the number of publicly traded companies.
Despite potential headwinds such as disinflation and interest rate cuts, Brown remains optimistic about the stock market’s long-term prospects. He believes that the ongoing decline in the supply of stocks, coupled with other factors like the growing adoption of artificial intelligence, could provide a tailwind for stock prices in the future.
Overall, the global stock market is experiencing a significant shift in supply dynamics, with buybacks and a lack of new stock issuance leading to a scarcity of stocks available for investors. As companies continue to remove stocks from the markets through buyback programs, investors may need to adapt to a new investing landscape with fewer opportunities to purchase publicly traded companies.
