Is The Surge In Capex Crowding Out Buybacks?

Research evidence excerpt

Is The Surge In Capex Crowding Out Buybacks?

Deutsche Bank

Research

Global Strategy Date

23 June 2026

Asset Allocation Strategy Update

Is The Surge In Capex Crowding Out

Buybacks?

Binky Chadha

Chief Strategist

+1-212-250-4776

n A surge in capital spending is sparking concerns along several dimensions.

One that is key to our outlook for equities is whether the capex will crowd out Parag Thatte

buybacks, the largest component of our demand-supply framework and a Strategist

significant driver of equity returns. +1-212-250-6605

Karthik Prabhu n Capex is clearly surging but has been driven by a very narrow group of big

spenders. They are indeed slashing buybacks as well as raising additional Strategist

capital. But offsetting that, companies whose earnings benefit directly from +1-212-250-1246

this capex are raising their buybacks, as is the rest of the S&P 500 which Dag Workayehu

accounts for the bulk of earnings and buybacks. Indeed, S&P 500 net Strategist

buybacks rose to a record in Q1, in keeping with record earnings, their most +1-212-250-4771

important driver.

n What about the massive IPO issuance wave? It will shrink buybacks net of

issuance in half. In the context of our demand-supply framework, in isolation,

this would no doubt be a drag on S&P 500 returns. But crucially, such waves

do not happen in isolation. They are typically accompanied by solid market

returns and occur during periods of strong equity demand, as is the case

currently in our reading.

From concerns about not enough capex to there being too much of it

A surge in capital spending is sparking concerns along several dimensions. One

that is key to our outlook for equities is whether the capex will crowd out buybacks,

the largest component of our demand-supply framework and a significant driver of