At the beginning of 2017, Goldman Sachs (GS) set out to forecast where funding would come from for U.S. stock purchases throughout the year to come. At that point, Goldman analysts estimated a total demand of about $1 trillion for 2017, with about $800 billion of that funding coming from corporate buybacks. The remaining $200 billion or so would come from ETF demand, according to Goldman. Now, just two months later, Goldman has significantly revised this forecast as a result of the Trump administration's delays in pushing through (or even presenting for consideration) tax reform policies that have long since been promised.

Trump's Tax Reform Never Materialized

President Trump campaigned on a great deal of talk about tax reform policies which investors and corporations alike assumed would materialize early on in his presidency. These tax reforms were supposed to be friendly to big business and the wealthy and were expected to encourage corporate buybacks. Goldman previously predicted about $150 billion in buybacks as a direct result of a one-time tax relief granted for foreign profit, for instance. However, Trump's tax reform policies have yet to come through, and investors are awaiting news of the plans anxiously.

In the meantime, Goldman has gone back to revise its initial estimates for buybacks in 2017. According to ZeroHedge, Goldman's David Kostin revised his forecast, indicating that he now expects corporations will buy back only about $700 billion in shares, or $100 billion less than before. The direct reason behind this shift? Trump's tax reforms, which Goldman predicts will be delayed by a substantial period of time. According to Goldman's guesses, the tax reforms may not take place until early in 2018 because of the wide array of different areas in which Trump finds himself quagmired. First and foremost on the list of items which are likely taking a priority position to tax reform is the repeal and replacement of Obamacare.

Even With Reductions, New Forecast is an Increase

In spite of Goldman's recent reductions in buyback estimates, the new forecast nonetheless represents an increase of 20% in levels from 2016. For that year, $584 billion in corporate buybacks occurred across the market.

Kostin's summary suggests that in 2016, "corporations and ETFs were the key drivers of positive US equity demand...in 2017, we expect history will repeat itself." Kostin suggests that ETF purchases of equity will still equal "$200 billion this year," and Goldman expects that mutual funds, household and pension funds will all remain net sellers overall. Finally, Kostin's report suggests that investors should look to dividend growth stocks given the likelihood of rising interest rates and the effect those changes would have on pure yield strategies including buybacks.

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