One of the main drivers of U.S. market growth in Q4 2023 was corporate stock buybacks.
Record-breaking Trends in 2023 and Beyond
The U.S. market is up 35% in 2023, the highest gain since 1997, and November-December 2023 saw the largest upward momentum in history at 13.5%, also the highest since 1997.
In 2024, the records continue with a sophisticated escalation of idiocy - a whole series of articles have been written about it.
Understanding the source of growth is quite interesting, and the latest Z1 report data allows us to break down the main buyers and sellers.
Analysis of Buyers and Sellers
When it comes to household finances, the Fed underestimates the ETF factor where most of the cash flow goes, but the story is the same with additional valuations - individuals were inactive at the end of the year amid record market gains.
Total cash flow related to individuals was minus 8 billion in Q4 2023 (inflows of 164 billion into ETFs, sales of 88 billion from mutual funds and another 84 billion in direct sales).
Since Q4 2021, CHOPs have redeemed 0.6 trillion in the market, and about zero in 2023, despite record equity gains. From 2013 through 2021, the cumulative net inflows of CHIP funds totaled nearly 5 trillion.
- Pension and insurance funds sold 52 billion worth of shares in Q4 2023 and have realized about 2.6 trillion since 2013 - these are consistent sellers of shares.
- Non-residents bought only 37 billion in 4Q 2023, with the balance of 4Q 2021 near zero, and the major purchases of 0.8 trillion came between Dec. 19 and Sept. 20.
- Banks and dealers in proprietary funds are not active bidders, at least in terms of net purchases.
- So who is active? In Q4 2023, the Fed recorded a record 270 billion net purchases net of placements, double the average quarterly pace over the past 8 quarters (127 billion).
Conclusion
Since the beginning of 2009, net repurchases have totaled 4.6 trillion, 3.8 trillion since 2013, and companies have injected a net 1.2 trillion into the market since December 21, when the major buyers in the form of individuals and non-residents were inactive.
Judging by the Fed's data, the main buyer of the stock market in 2022 - 2023 will be the companies themselves.