A New Catalyst Enters the Market

• S&P 500 companies repurchased an estimated $1.2 trillion in shares in 2025.

• Goldman Sachs noted 2026 announcements are 1.2x the pace of 2025.

• That should drive down the index earnings multiple, making stocks cheap.

The next upside catalyst is about to be unleashed on the stock market…

Over the last few weeks, the S&P 500 Index has been on what feels like a continuous run higher. Because investors had positioned for the worst‑case outcome in the Middle East, momentum‑driven funds were caught leaning the wrong way as negotiations unexpectedly progressed. Quant dedicated funds had maxed out their short exposure to stocks or held low allocations to the asset class…

With the anticipated economic catastrophe yet to play out, and the stock market reaching new highs, many of those momentum investors have been forced to cover their shorts and take long positions again. In fact, brokerage firm UBS recently estimated those asset managers could quadruple their exposure to the S&P 500 by early May.

The timing of this switch could be unfortunate—because just as momentum investors are getting back in, another upside catalyst may be coming to the market.

With the release of corporate earnings, companies can resume buying back their own shares. That drives up earnings power while lowering the fair value price-to-earnings (“P/E”) multiple on the S&P 500. The combination of these two events could underpin a long-term steady rally.

But don’t take my word for it, let’s look at what the data’s telling us…

Two weeks ago, second-quarter earnings formally got underway when financial behemoth JPMorgan Chase (JPM) released results. Since then, most of the major financial companies have reported. And over the next couple of weeks, large-cap technology companies like Alphabet (GOOGL), Apple (AAPL), Amazon (AMZN), Meta (META), and Microsoft (MSFT), among others, will do the same.

Prior to those reports, most companies stop buying back their shares for roughly two weeks. But about a day or two after the numbers are out, they can resume share repurchase plans. Here’s the added twist... technology and financial companies tend to be the most active buyers of their own shares.

According to recent commentary from Citadel Securities and brokerage firm Goldman Sachs, those numbers are expected to swell…

The above chart represents annual stock buyback totals. The solid colors are confirmed amounts, while the shaded bars are estimates for 2025 and 2026. As you can see, the trajectory has been steadily higher—with a record $943 billion worth of shares repurchased in 2024. Analysts forecast that figure was surpassed in 2025 with a record $1.2 trillion worth of buybacks.

More importantly, Citadel Securities and Goldman Sachs note that corporate repurchase announcements year‑to‑date are running about 20% above the same point in 2025. Goldman expects the full‑year total to finish roughly 12% higher. The math puts 2026 buybacks just over $1.3 trillion.

That’s important as it relates to corporate earnings. If the amount of outstanding shares shrinks while business holds steady, then earnings per share (“EPS”) naturally improve—because the math changes with less available stock. If business improves, earnings power compounds even faster.

For example, say a growth-oriented technology stock has a fair value P/E multiple of 32x. With 100 million shares outstanding and $1 billion in forecast earnings, EPS would be $10—implying a fair value share price of $320. But if the company retires 10% of its shares, leaving 90 million outstanding, and earnings remain at $1 billion, EPS rises to $11.11. At the same P/E multiple, the fair value jumps to $355.52. The buyback lowers the multiple and creates more room for upside.

Now imagine this example applied to an index…

S&P 500 earnings power resembles that of a single company—an aggregate of its constituents. Over the next 12 months, those members are expected to earn $338, according to FactSet.

At a forward 12-month P/E of 20.9x, that implies a current fair value for the S&P 500 near 7,064. Calendar year 2027 estimates of $373 suggest a fair value of 7,800 by year-end.

Now layer on expected buybacks—Wall Street anticipates a 3% reduction in outstanding shares by year-end. That improves earnings power solely through share compression, lowers the effective multiple, and opens the door for investors to push the index even higher.

We’re about to enter the thick of earnings season, but the signals are clear: companies are increasingly using AI to deliver better‑than‑expected profits. With one‑third of index members having reported, profits are up 15.1%, versus expectations for 13% heading into the quarter. If the tech sector confirms the trend, earnings estimates may already be too low. And with expanded earnings potential from share repurchases layered on top, the S&P 500 may have even more upside than investors realize.

Five Stories Moving the Market:

President Donald Trump and his national-security team are skeptical of Iran’s offer of a deal that would see the Strait of Hormuz open and discussions about its nuclear work tabled, according to U.S. officials; Trump was said to express concern about Iran not dealing in good faith or being willing to meet his key demand: ending nuclear enrichment and vowing never to make a nuclear weapon – WSJ. (Why you should care - the White House is expected to respond to the offer sometime in the next few days)

Secretary of State Marco Rubio suggested Iran still wants to retain control of the Strait of Hormuz and cast that as unacceptable to the U.S.; he said the White House cannot tolerate Iran continuing to decide which vessels can sail through the strait or allow any Iranian tolls – Bloomberg. (Why you should care – U.N. diplomats echoed Rubio’s comments, saying Iranian control of Hormuz would set a dangerous global precedent)

Cadence Design Systems raised its full-year revenue forecast, betting ​that sustained, heavy investment in specialized artificial intelligence processors ‌will continue to drive demand for its chip-design tools; the company now ​expects fiscal 2026 revenue between $6.13 billion and $6.23 billion, compared with ​its prior projection of $5.9 billion to $6 billion – Reuters. (Why you should care – this is another signal that AI‑driven semiconductor design demand is accelerating as customers invest more in next generation chips)

Big American companies are piling up profits despite war and consumer anxiety, bolstered by healthy sales growth; Wall Street’s expectations for earnings suggest big U.S. companies are far healthier than wider economic concerns might indicate – WSJ. (Why you should care – increasing profits should lower the S&P 500 Index’s price-to-earnings multiple, boosting investor purchasing power)

Microsoft and OpenAI have agreed to drop the software giant’s exclusive right to sell the startup’s AI models, opening the door for the ChatGPT maker to pursue deals with cloud-computing rivals like Amazon – Bloomberg. (Why you should care – the agreement boosts OpenAI’s sales potential ahead of an expected initial public offering later this year)

Economic Calendar:

Earnings: AMT, GLW, GM, HOOD, KO, NVS, SBUX, SHW, STX, UPS, V

Bank of Japan Monetary Policy Announcement

BoJ’s Ueda (Governor) Speaks (2:30 a.m.)

ECB Bank Lending Survey (4 a.m.)

U.S. – ADP Employment Change Weekly (8:15 a.m.)

U.S. – FHFA House Price Index for February (9 a.m.)

U.S. – S&P/Case‑Shiller Home Price Index for February (9 a.m.)

U.S. – Conference Board Consumer Confidence for April (10 a.m.)

U.S. – Richmond Fed Manufacturing Index for April (10 a.m.)

Treasury Auctions $70 Billion in 6-Week Bills (11:30 a.m.)

Treasury Auctions $30 Billion in 2-Year Floating Rate Notes (11:30 a.m.)

Treasury Auctions $44 Billion in 7-Year Notes (1 p.m.)

ECB’s Lagarde (President) Speaks (1:30 p.m.)

U.S. - American Petroleum Institute Crude Oil Inventory Data (4:30 p.m.)