After spending the better part of the past couple of years bracing for a recession that never materialized, corporate CEOs are showing signs of renewed optimism lately. The CEO Confidence Survey plunged to a very recessionary level in the low 30s by the beginning of 2023, but as the economy has remained resilient it has rebounded sharply to a current reading of 54 (crossing back above 50 is significant in that it signals more positive than negative survey responses). An improvement in the earnings backdrop certainly helps, with S&P 500 earnings returning to growth in Q4 of 2023 and showing further progress in Q1 of this year.
This has led to increasing signs that corporate animal spirits are returning this year, despite higher for longer interest rates and sticky inflation – the IPO market is slowly thawing, M&A activity has been picking up, and share buybacks are surging again. Led by some of the major Tech companies, buybacks are on track to hit $934 billion this year, which would be the second highest ever according to estimates from Goldman Sachs. And they may be headed above $1 trillion for the first time next year. These are enormous sums, underscoring that corporations continue to be one of the major buyers of stocks and giving a boost to the current bull market.
Source: The Conference Board, as of 5/9/24
Source: Bloomberg, Goldman Sachs, as of 5/8/24
Carl Noble, CFA®
Senior Vice President of Investments
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