Goldman Sachs said in a research note Monday that it forecasts 2024 S&P 500 total cash spending will rise by 9% to $3.7 trillion.
This will be led by cash mergers and acquisitions rising by 15% and buybacks increasing by 13%, with rising CEO confidence suggesting firms will be more willing to deploy capital than last year.
"M&A activity will rise but high valuations and a spike in rates imply firms will prioritize shares as consideration; the cash component has fallen to just 42% of 1Q announced deals (vs. 58% in 2023)," wrote Goldman Sachs.
Analysts added: "Interest rates are now expected to remain higher for longer than previously anticipated and will likely disincentivize large debt issuance to fund spending plans. However, corporates have started to rebuild cash balances."
For the typical S&P 500 stock, cash balances are said to have increased by 7% year-over-year during the past 12 months. Goldman Sachs forecasts S&P 500 earnings per share will grow by 8% in 2024 and 6% in 2025, providing companies with incremental cash to spend.