The Magic of Stock Buybacks is Keeping the Bull Market Afloat

What is “The Wealth Effect?”

“The wealth effect indicates when the value of equity portfolios are on the rise because of accelerating stock prices, individuals feel more comfortable and confident about their wealth, which will cause them to spend more.”

‘Eye-popping’ payouts for CEOs follow Trump’s tax cuts

“Insider sales feed the narrative corporate tax cuts enrich executives in the short term while not yielding long-term benefits for workers. The biggest winners from Donald Trump’s new tax law are corporate executives who have reaped gains as their companies buy back a record amount of stock, a practice that rewards shareholders by boosting the value of existing shares.”

These 8 companies have contributed the most

by Ethel Jiang, Business Insider Markets, Sept 25, 2018

  • Companies who were flush with cash started to buy back shares after the S&P 500 started to recover from the global financial crisis.
  • Buybacks cut a company’s total share count, and spread the profits over fewer shares, boosting their per-share earnings.
  • Over the past decade, S&P 500 companies bought back $4.4 trillion shares, including the record-breaking buybacks from Apple that totaled $226.6 billion.
  • Share buybacks are expected to continue growing for the coming months, according to an analyst from S&P Dow Jones Indices.

For the 9-1/2-year equity bull run, share buybacks have been a solid backbone of the stock market’s continued growth. Buybacks cut a company’s total share count, and spread the profits over fewer shares, boosting their per-share earnings and satisfying Wall Street.

After the S&P 500 started to recover from its financial crisis low in March 2009, companies that were flush with cash started to buy back shares. According to S&P Dow Jones Indices, S&P 500 companies have bought back $4.4 trillion shares over the past decade, including the record-breaking buybacks from Apple that totaled $226.6 billion. No company has bought back more shares than Apple, which announced in March 2012 it would use a large chunk of cash to make the purchases.

The amount in share repurchases executed by S&P 500 companies hit a record of $190.6 billion in the second quarter, a 58.7 % year-over-year increase, and that number is expected to keep growing for the coming months, according to S&P Dow Jones Indices.

“Given the record earnings, strong cash-flow, investor demand, and corporate statements, the indications are the high level will continue for the rest of the year,” said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

Here are the top eight companies that contributed $689.4 billion, or 16% of the total S&P global 500 companies buybacks, mostly from the information technology and financial sectors.

1. Apple

Ticker: AAPL

Sector: Information Technology

Market cap: $1.1 trillion

10-year buybacks: $226.6 billion

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