A global shortage of equities will support the market for the foreseeable future

• With fewer companies going public and a surge in buyback programs, there is a global shortage of stocks.

• According to JPMorgan, net new issuance by global companies has become the most negative since 1999.

• "Every year, $1.2 trillion worth of stocks disappear from the market globally as a result of the roundups," said Josh Brown of Ritholtz Wealth, "and these stocks are available to investors.

A recent JPMorgan report noted that a large number of buybacks, fewer secondary offerings, and a lukewarm initial public offering (IPO) market are creating a supply shortage in the global stock market.

An analysis by Nikolaos Panigirtzoglou of JPMorgan Chase shows that more than $1 trillion worth of stock leaves the global market each year through corporate stock exchanges.

So far this year, there has been a net reduction of $120 billion in global listings, the largest reduction in net new issuance since 1999, according to JPMorgan Chase.

If supply is decreasing in the global stock market, then stock prices will continue to rise as long as demand remains constant or increases.

That's the thinking of Josh Brown, chief executive officer of Ritholtz Wealth Management, who said on Thursday's podcast that unless there's another surge in IPOs like the one we saw in 2021, stock prices should see a long-term tailwind from the continued decline in the supply of stocks. ..

"Every year, $1.2 trillion worth of stocks are bought off the market by investors worldwide as a result of the MPP. That's a fact, and it's not going to change, and in fact it's going to be higher this year. In the U.S. and now abroad, when country after country sees the U.S. model, they say, 'Well, do you know how to solve economic problems? You've got to solve the capital market problem first," Blanc said on CNBC's "Halftime Report.

China is doing it, Japan is doing it, and Larry Fink just dedicated his entire "Dear Shareholder" letter to 17 countries around the world to get them on board with the 'Hey, let's get our stock markets back to normal, just like the U.S.! The letter was dedicated to 17 countries around the world to get them on board with the 'Hey, let's do what the U.S. does and get our stock market back to normal' philosophy. So this is happening, and it's going to involve more and more buybacks, which means less and less money going to the market," Brown said.

Another source of cash that will be used to gobble up companies is private equity, which is sitting on about $2 trillion worth of dry powder waiting to be invested. Not to mention the more than $6 trillion in money market funds that could end up in the stock market.

"That means more companies are going to leave the market," says Brown." There are more than 3,000 stocks now, compared with 7,000 when I started. Now, most of these missing stocks are penny stocks, so get rid of them. But the Wilshire 5000 Index can't even be compiled because there aren't enough public stocks to populate it.

"The bottom line is this. If there's not another five years like 2021 where every piece of shit on the planet goes public, we're not going to have enough issuance to satisfy the pools of money that need to put their money into the stock market," Browne said on this topic on this week's podcast.

Other positives for the stock market, according to Brown, include ongoing deflation, the possibility of a Fed interest rate cut, and the growing popularity of artificial intelligence.

Read the original article on Business Insider