The Smartest Money

Verdad

Amos Lawrence

Research

5 Pages

Verdad examines whether corporate share issuance can act as a market- and sector-timing signal. US net issuance peaked at $1.5 trillion in 2000, and the 2000 and 2021 issuance manias were followed by -12% and -18% S&P 500 returns, while sector results show large differences in predictiveness.

Key Takeaways

Issuance extremes matter: The 2000 and 2021 issuance manias were followed by S&P 500 total returns of -12% and -18%, respectively.
Sector spreads widen: Low-issuance years beat high-issuance years by 21 percentage points in biotech/pharma and 20 points in communication services.
Current signals diverge: Biotech/pharma, materials, and industrials are in the top issuance tercile; communication services and consumer staples are in the lowest.
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