The equity supply trap has opened

Stephen Innes SPI Asset Management

Bloomberg macro strategist Simon White warns that rising equity issuance is a signal investors should not ignore. Historically, major peaks in gross issuance have often appeared near market tops, corrections or late-cycle bull phases.

The market’s negative net supply tailwind is at risk. Low issuance and large buybacks helped support equities, but a wave of new share sales from AI-linked firms, private giants and listed companies could turn that support into a headwind.

The trader risk is supply meeting stretched positioning. Households already hold historically high equity allocations, earnings expectations are rich and margin assumptions are doing much of the heavy lifting. If issuance rises as earnings forecasts fade, the tape becomes far more vulnerable to an air pocket.

Author

Stephen Innes

SPI Asset Management

With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.

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