Equity supply surge threatens market technicals
The guest argued that the multi-year technical tailwind of shrinking equity supply is reversing due to a wave of new IPOs and secondary issuances, threatening the market's supply-demand balance.
The argument
While corporate buybacks previously reduced equity supply amid high liquidity, rising supply from new IPOs and large corporate issuances is creating a 'Shakespearean sea change' that could pressure overall market valuations.
The thesis, stress-tested
✓ What validates it
- ✓A sustained increase in IPO volume and secondary offerings
- ✓A measurable slowdown in net corporate share buybacks
▸ Risks discussed
- ▸A sudden re-acceleration of corporate share buybacks
- ▸Persistent retail and institutional inflows that easily absorb the new supply
Hear it yourself
"The earnings have been super, super powerful. Where is the more speculative story emerging for you? Oh, well, we've seen an incredible rally in the most speculative portions of the market. Look at the Goldman Sachs unprofitable tech index up 15% in last week alone. It's up 65 since the March lows. You look at the cohort of space names, most of them are unprofitable. They're up a 100% year to date. You look at the Russell twenty five hundred, the leaders in that index are all coming from very unprofitable names. If you take out or if you look at the names that are actually generating profit and and up and and trading at a discount, they're only up about 8%."
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