Stocks make up 52% of their aggregate allocation; Debt, 20%; and cash, 12%. The gap between stock and debt allocation is near a record high, according to Goldman.
Looking ahead, Goldman strategists expect stock allocation to continue to expand despite the recent slowdown in economic growth, with companies being the largest source of net stock demand in 2022, followed by households and overseas investors. They forecast net share sales by mutual funds and pension funds over the next year and estimate that the S&P 500 will end at 4,900 in 2022, up 4.25% from its target of 4,700 for 2021.
Buybacks vs. Revenue
“Buyback growth will far outperform earnings growth next year,” said Goldman strategists, who only forecast earnings per share growth of 2%.
The companies have approved a total of $ 884 billion in buybacks since the beginning of the year, a record level. Goldman strategists anticipate companies will complete roughly a quarter of those buybacks in the fourth quarter as buybacks accelerate, leaving plenty of room for more buybacks in 2022. Goldman forecasts company buybacks of $ 350 billion in 2022 by 2021.
They are also expected to add to share price gains in the next year: merger and acquisition activity, which is the strongest since 2007 at $ 3.24 trillion by the third quarter of 2021.
Attractive financing rates together with strong but moderate economic growth “should provide tailwind for further strategic M&A activities,” write Goldman strategists.