One of the key signs of a stock bubble is the issuance of new stock. Simply put, when the stock market is overvalued, smart firms will issue new stock to take advantage of these high values. The increase in supply will flood the market and generate downward pressure on stocks. We are seeing more issuance in the market this year, but it is not at extreme levels. The large increases in 2020-2021 were associated with SPACs, which cratered the following year.
On the other hand, stock buybacks will occur when the stock market looks cheap, and CFOs want to increase their companies' stock prices. We are still seeing the numbers increase, although at a slower pace.
What is important, and what we have not done here, is to adjust buybacks and issuance to the total stock market valuation, which may provide a better relative measure. In that case, buybacks may not seem as excessive, nor does issuance seem to be exceptional. There are still mixed signals on these CFO signals of overvalued stocks.
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