Corporate Buybacks Surpass $200 Billion In Q3, Hit All Time High

As US equity indexes soared to all-time highs over the summer, traders were left in slackjawed wonder by stocks' resilience to every market negative, including a burgeoning trade war with China and outflows from nearly every ownership category.

At the time, analysts attributed this behavior to the robustness of the Trump economy and the fiscal boost of the Trump tax cuts. But we dared to posit another explanation that somehow slipped below Wall Street's radar: Citing research from Goldman and BofA, we pointed out that after notching a quarterly record in Q2, the pace of corporate buybacks accelerated in Q3. And while investors celebrated Apple's stunning market milestone, Goldman's David Kostin argued that markets were asking the wrong $1 trillion question.

Four months later, the boost from Trump's tax cuts is fading, stocks can't keep a bid and S&P Dow Jones Indices just confirmed something we had long suspected (something that was driven home once again by Oracle's earnings report last night): Namely, that the most important factor in US markets this year has been the corporate bid. That's because, after clinching a quarterly records in Q1 and Q2, members of the S&P 500 went on to set another quarterly record for share repurchases in the Q3.

Qualcomm

That's right: S&P revealed on Tuesday that quarterly S&P 500 share repurchases surpassed the $200 billion mark for the first time in Q3 o a record $203.8 billion. That's the third straight quarterly record for share buybacks, displacing the prior quarterly record of $190.6 billion, set during Q2 2018.

This year's Q3 figure represents an increase of 57.7% from the $129.2 billion from Q3 2017. Through the end of the third quarter, buybacks are up 52.6% to $583.4 billion from the prior year's $382.4 billion, leaving the annual total just 1% shy of the previous annual record of $589.1 billion set in 2007. And that's with another quarter left to report (though, judging by the price action, it's probably fair to assume that the pace of purchases has slackened somewhat, though Boeing and Johnson & Johnson each announced buybacks this week to boost their sagging shares).

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