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- [00:05]
A
The IPO market is booming again. But is the surge in activity a sign of market strength or a warning that the market is at its peak? I'm Allison Nathan and this is Goldman Sachs Exchanges. Today. I'm sitting down with my colleague in Goldman Sachs research, Ben Snyder, chief U.S. equity strategist. Ben, welcome back to Exchanges.
- [00:26]
B
Good to be with you.
- [00:27]
A
So, Ben, let's get into it. I know you're getting lots of questions about this topic. We've obviously seen years of muted issuance and that was a topic for quite some time, but IPO activity has clearly accelerated. So just give us the context, put some numbers on it for us. How much growth have we seen?
- [00:45]
B
We're just about halfway through the calendar year and so far we've seen just shy of 50 US IPOs. That's about double what we saw at this point last year. And it's the largest number of deals at this point in the calendar year since 2021, which was one of the largest IPO years on record. So we are definitely seeing a recovery. What's notable though is that the size of the deals on average has been very large. And so in dollar terms, we're already basically tied with 2021 for a record year of about $120 billion in issuance.
- [01:14]
A
Right. So number of deals is up tremendously, as is the size of those deals. So pretty impressive stuff we're seeing. What's driving this activity? Talk us through that.
- [01:25]
B
So one, as you noted, is we're recovering from a four year stretch of very muted activity. We had an ipo boom in 2021. Valuations were elevated. We had the sharpest Fed hiking cycle on record, and that led to a few years of recovering valuations. And so to some extent what's happening is just a normal recovery. But on top of that, we have of course, some very large companies that are coming to market and we have this immense desire for capital to help fund the AI boom. And putting all that together is the reason we're seeing such a strong acceleration in deal volume.
- [01:56]
A
But it's been concentrated. I don't put words in your mouth, but it's been concentrated in certain sectors. Obviously technology, the AI related theme, is it as narrow as I think it is in terms of that sector?
- [02:08]
B
In number of deals, we've seen pretty diverse array. There's been health care deals, there's been deals in the industrial space. But in dollar terms, you're right to point to AI as the key driver.
- [02:18]
A
And so if we think about the AI narrative and how much momentum it's had. If that momentum cools, what do you think happens to the IPO pipeline?
- [02:27]
B
Well, to some extent, a healthy market environment is a requirement for IPO activity. We've built a tool we call the IPO barometer. We view it as a macro indicator of how conducive the environment is for IPO activity that combines things like interest rates and CEO confidence. Equity valuations. Today, all those signals are pretty healthy. If the long term average of the barometer is about 100, today we're at 140, which is not as high as we got in 2021, but otherwise at the top of the range. And if I were to deteriorate, probably a lot of those indicators would deteriorate as well.
- [02:59]
A
So IPO activity really depends a lot on the macro conditions, the backdrop. But does the activity itself share anything in particular about sentiment in the market?
- [03:08]
B
Definitely an indication of positive sentiment, both on the corporate side, the sense that business activity is good and there's a desire to use the capital that will be raised through IPOs. And in terms of investor sentiment, which you see broadly in equity valuations, the real concern from investors is is this indicative of a kind of euphoric environment that marks the peak of bubbles? It's not lost on clients that we also saw a very sharp increase in IPO activity, for example, in the late 1990s or as I mentioned earlier, in 2021.
- [03:37]
A
So do you see a lot of similarities or are there differences that we should be focused on as well?
- [03:42]
B
There's some similarities. Equity valuations are very high, not quite as high as in 2021 or 2000, but they're very high. Investor confidence is clearly elevated. And of course, there's the backdrop of technological change and potential new area to invest in. Those are the similarities. I think the key contrast is something we alluded to a little earlier. If you look at the 25 year average, there's about 100 deals per year, so we're tracking pretty close to that average. In 2021, there were over 250 IPOs. In 1999, almost 400. So although the dollar volume is quite elevated, although we're seeing an acceleration in activity, to me it still looks like we're a far cry from that level of euphoric sentiment that we saw in those episodes.
- [04:24]
A
Right, okay, so that's a comforting message you're giving us. When we think about this issuance. It's obviously happening against a backdrop of a very strong equity market. Broadly, there's been some volatility, but we're basically at or very close to all time highs in the major US equity indices. What does the additional supply of shares mean for that overall strength in the equity market?
- [04:47]
B
This is probably the biggest concern we hear in our conversations with investors. Whether it's institutional investors, corporates. It's amazing actually. More than AI, more than the macro environment today, this is the fear that investors have that that supply is going to overwhelm the market. And I think there are a few reasons not to worry. First, as I mentioned earlier, the number of deals is really not exceptional, although the magnitude of dollar issuance is quite large. Second is, of course markets get larger over time. And so although we're forecasting a record magnitude of issuance, about $700 billion this year, if you combine IPOs and, and follow ons, that scales to just about 1% of the equity market. That's actually lower than the long term average. It's roughly in line with the environment from 2015 to 2019. And then the third reason is that corporate demand is still quite elevated. If you look at buybacks, they're going to exceed a trillion dollars this year. Which means even before we think about retail investors or hedge funds or mutual funds, corporate demand for shares is going to outweigh corporate supply of shares.
- [05:45]
A
That's actually a very interesting point you make. I mean, people don't think about that demand side as much in this context. But do you see an inflection point coming though, at some point? Will you see that tip and demand less than supply?
- [05:58]
B
So admittedly the math does get harder in 2027. Part of the reason that in our view the demand will outweigh the supply this year is that a lot of these IPOs are coming public with relatively small floats. They're issuing relatively small shares of the company when they first launch. But over time, more shares will come to market, investor lockups will expire, and that suggests that potentially there will be a lot more supply as we look into 2027 and beyond. And of course there are a lot of uncertainties between here and there, but it does become a more challenging outlook.
- [06:27]
A
So given that, talk to us about the broader outlook you have for later this year and into 2027 for the US equity market.
- [06:35]
B
We could spend a whole podcast talking about this. But the medium term outlook is similar to what we've seen recently, which is a backdrop of very healthy earnings growth powering the market higher. To give you some numbers, The S&P 500 is up about 10% year to date. Over that same period forward, earnings are up about 17%. That means PE multiples are actually lower today than they were at the start of the year. Earnings have done all of the driving and our expectation is that will continue. Of course, as we discussed, there are a lot of uncertainties, not just IPOs, geopolitics, AI. So I do think we'll see continued volatility on the market, but we also think the bull trend should continue.
- [07:11]
A
We are hearing a lot about equity volatility, but again, when I look at my screen, we're mostly near record highs. So is it a volatile equity market today? Really?
- [07:19]
B
You're getting at a really interesting disconnect which is if you look at the index level, the market has not been that volatile. But what's happened is the combination of extremely high volatility at the individual stock level and very low correlations, I.e. the various stocks moving in different directions. And so that means the index has not been that erratic, but stocks have been. And when you look at investor leverage, whether it's margin debt, hedge fund leverage, or the increase in assets of leveraged ETFs, all of that contributes to the view that we're going to see more volatility going forward.
- [07:48]
A
Interesting. So you have a pretty optimistic outlook for earnings, but there's going to be volatility. What are you telling investors right now?
- [07:56]
B
The message to investors depends on the investment horizon. For the hedge funds who are trying to trade, the short term volatility becomes much more important than for example, a long term investor. But my message to almost everyone is to keep an eye on earnings and really highlight that that is the strength that's driving the market.
- [08:10]
A
Right. And as long as the economic growth that we expect continues, we would expect earnings to hold up. But there's a lot of uncertainty, as you say.
- [08:17]
B
That's right.
- [08:17]
A
Thanks so much for joining us, Ben.
- [08:19]
B
Thank you.
- [08:19]
A
This episode of Goldman Sachs Exchanges was recorded on Monday, June 22, 2026. I'm Alison Nathan. Thanks for listening.
- [08:30]
C
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