The equity market is likely to see a significant boost over the coming years as US share buyback volumes are expected to increase further. According to JPM, the US buyback force, which has been instrumental in propelling the equity market this year, will become even stronger. This means an additional $600 billion in share buybacks on top of the record $1.5 trillion annual pace seen this year.

The current buyback cycle is already at an unprecedented level, with companies repurchasing a staggering $1.5 trillion worth of shares in 2022 alone. This represents a significant increase from the 3%-4% of equity market cap range seen before the pandemic. As companies continue to prioritize shareholder value and reduce their share counts, the buyback force is likely to remain strong for the foreseeable future.

The reasons behind this trend are twofold. Firstly, companies have been generating significant profits in recent years, thanks to the economic recovery from the pandemic and the resulting increase in consumer spending. Secondly, interest rates are expected to remain low for the time being, making it cheaper for companies to borrow money and fund their buyback programs.

The impact of this trend is far-reaching. For one, it will continue to support the equity market, driving prices higher and creating new opportunities for investors. Additionally, the increased liquidity in the market will lead to a more stable and efficient pricing mechanism, as companies are able to buy back their shares more easily.

However, there are also potential risks associated with this trend. As companies continue to repurchase shares, the supply of shares available for investors may decrease, leading to higher prices and potentially inflated valuations. This could lead to a market correction if investors become overly optimistic about the future growth prospects of these companies.

The continued growth in US share buybacks is a positive development for the equity market. While there are potential risks associated with this trend, the benefits of increased liquidity and support for the market are likely to outweigh them in the long run. As such, investors should remain optimistic about the future prospects of the equity market and continue to prioritize shareholder value-oriented companies in their investment strategies.