Goldman Warns That Buybacks Are ‘Plummeting’

  • Buyback spending is plummeting as companies spend less amid growing global uncertainty.
  • According to Goldman Sachs, buyback spending slowed 18% to $161 billion during the second quarter, and the firm anticipates that the slowdown will continue.
  • “During full-year 2019, we expect S&P 500 cash spending will decline by 6%, the sharpest annual decline since 2009,” the firm says.
  • As corporate spending slows, investors hunting for yield should look to high-dividend stocks, the firm says.

Corporate buybacks are “plummeting” as companies tighten their purse strings, and it could have a big impact on the market, Goldman Sachs warned in a note to clients.

In the second quarter, S&P 500 share buybacks totaled $161 billion, about 18% less than the first quarter, the firm found. The amount spent on buybacks this year is down 17% from a year earlier, although it is on track to be the second highest total on record, Goldman said.

The firm anticipates that this trend will continue, saying “early indications suggest second-quarter weakness in buybacks may persist.”

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For 2019, total buybacks will drop 15% to $710 billion, and in 2020 they see a 5% decline to $675 billion, the firm predicted.

Share repurchases have been a key element during this bull market, the longest on record. By repurchasing shares, a company reduces the number of shares outstanding. It can have the effect of boosting the stock price and lifts earnings per share figures.


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