Will surging equity supply derail the U.S. bull market? Goldman Sachs weighs in

U.S. equity issuance is expected to surge in 2027, potentially impacting stock valuations, according to Goldman Sachs strategists. The firm anticipates $600 billion of equity issuance in the year, including $175 billion of IPOs, which would represent 0.8% of U.S. equity market value. This issuance is on par with the 10-year average.

However, the strategists maintain that the bull market is not likely to be derailed, as strong demand from corporations and investors is expected to absorb the supply. They note that the slowdown in issuance is primarily due to rising interest rates and reduced market breadth, with the median S&P 500 stock trading 16% below its high.

Despite this, the strategists remain optimistic, citing strong growth, rising stock prices, lower interest rates, and AI investments as key drivers for 2027. They also highlight the support equity provides in funding the AI boom, with AI-related follow-on offerings totaling $65 billion this year. Gross buybacks are expected to reach about $1.7 trillion in 2027, up from $1.5 trillion this year, further bolstering the bull market.