Rudi's View | 4:59 PM
In Today's Edition:
- IPO Mania; Not What It Looks Like At Face Value
- Picture Of FY26
- Best Buys & Conviction Calls
By Rudi Filapek-Vandyck, Editor
IPO Mania; Not What It Looks Like At Face Value
It is one of the narratives doing the rounds in global equity markets: beware the future, because 2026 might just see the largest ever IPO deals come to the US market.
But is this yet another oversimplistic interpretation?
Global strategists at UBS think so. Their counter-argument is that IPOs, in isolation, tell us nothing about markets and their outlook.
One must dig deeper and consider the broader context.
While this year's estimated US$160bn in IPOs will certainly be the largest on record, UBS counters that, when measured against the overall size of the US market, it looks rather medium-sized.
Not much is coming to the US market this year outside of a few giant fresh listings, but that's hardly watertight evidence of unbridled investor exuberance. In actual numbers, 2026 is cruising along its 30-year trend.
Adjusted for market size, UBS points out, the credit market is seeing much larger corporate issuance than equity, and even there, credit spreads are not signalling any form of market stress.
When one also includes the fact many US companies continue buying back their own shares, the net effect -- even including the giant IPOs -- is less supply of US equities.
And buybacks, says UBS, are projected to remain substantial this year.
To spell it out: net equity supply is negatively related to equity valuations, while buybacks are positively related to them.
Having said all of that, UBS does acknowledge valuation support might diminish somewhat as US companies are spending significantly on the AI infrastructure buildout and, as each dollar can only be spent once, this might reduce their capacity for further buybacks.
Still, it is UBS's view this is not where the real risk is situated for today's market. Instead, the broker suggests investors need to keep a close eye on the return on investment (ROI) on the large sums being spent on AI.
A second important indicator is whether corporate margins -- currently at all-time record highs -- can be maintained.
Picture Of 2026
If one perfect graphic can capture a thousand words, the one below surely does a fine job of describing the financial year past for investors in the ASX.
The black line on top is for the Materials sector. Energy is in blue.
Near the bottom, we find healthcare and technology.
The ASX returned a total of 6.10% for the year, with dividends contributing more than half.
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