thing keeping the stock market afloat right now — Companies set a record for share buybacks in the second quarter, while investors set their own record for selling stock-based funds in June.
Certainly cause for pause? Market is only going up slightly and that based on record corporate buy backs?
- Companies set a record for share buybacks in the second quarter, while investors set their own record for selling stock-based funds in June.
- On the corporate side, officials are finding that repurchases are the best use for investor cash now, while individual investors are fearful that a trade war could offset strong economic momentum this year.
- All in all, the corporate buying has won out, keeping the S&P 500 slightly positive for the year.
Stocks right now are hanging by a thread, boosted by a bonanza of corporate buying unrivaled in market history and held back by a burst in investor selling that also has set a new record.
Both sides are motivated by fear, as corporations find little else to do with their $2.1 trillion in cash than buy back their own shares or make deals, while individual investors head to the sidelines amid fears that a global trade war could thwart the substantial momentum the U.S. economy has seen this year.
“Corporate cash is going to find a home, and it’s either going to be in buybacks, dividends or M&A activity. What it’s not going to be is in capex,” said Art Hogan, chief market strategist at B. Riley FBR. “Individuals are looking at the turbulence we’ve seen this year that we had not seen last year. That creates its own sort of exit sign for investors who don’t want to deal with that.”
The numbers showing where each side put their cash in the second quarter are striking.
Companies announced $433.6 billion in share repurchases during the period, nearly doubling the previous record of $242.1 billion in the first quarter, according to market research firm TrimTabs.