US households to flip to net buyers of stocks in 2025, Goldman Sachs says

Investing.com -- US economic strength is expected to prompt households to turn from net sellers of stocks to buyers in 2025, according to analysts at Goldman Sachs.

However, in a note to clients, the analysts added that household demand will only shift "marginally" to equities from credit as the Federal Reserve embarks on an anticipated cycle of policy easing.

The Fed slashed interest rates by an outsized 50 basis points last month to a range of 4.75% to 5.00% and is projected to roll out more reductions before the end of the year.

"Stable interest rates near 4% suggests investors will continue to have attractive alternatives to equities, but to a lesser degree than during the last couple years," the Goldman Sachs analysts wrote.

Mutual funds will be the largest sources of equity supply, the analysts said, predicting that these funds will sell $550 billion of US equities next year. Mutual funds pool together funding from various investors to then purchase securities. Pension and insurance funds are also seen being net sellers of $100 billion and $150 billion of equities in 2025, respectively, the strategists stated.

Despite the possible shift in household investment stances, the biggest sources of equity demand are forecast to come from companies and foreign investors.

Corporations, in particular, are estimated to purchase $1 trillion in equities next year, marking an 18% uptick compared to 2024, thanks in large part to a jump in share repurchasing activity.

"We expect buyback growth will remain robust in 2025, largely driven by strong S&P 500 [earnings per share] growth of 11%," the Goldman Sachs analysts said.

They named foreign investors as their pick for the second-largest net buyer of US stocks next year due to an anticipated dip in the value of the dollar. In theory, a weaker dollar can make US stocks less expensive in local currencies, bolstering foreign demand.

"Our [foreign exchange] strategists expect the US dollar will gradually depreciate to reflect continued but diminished US exceptionalism, helping sustain foreign investor demand for US stocks," the analysts said.

Source: Investing.com