2022 is certainly off to an inauspicious start. Spring hasn’t even fully sprung yet investors’ nerves are already frayed thanks to a hawkish Fed pivot, the highest inflation in decades, and even war. Equity volatility has surged and talk of recession has started to permeate financial media thanks to a flattening yield curve. And yet, despite all the gloom & doom, over the past couple of weeks stocks have found their footing with the S&P 500 Index rallying more than 10% off its intraday low back on February 24th. Who has bravely entered the fray to buy when so many others are selling? It’s clear that at least part of the answer lies with US corporations buying back their own stock.
Estimates from Goldman Sachs show that buyback authorizations have already surpassed $300 billion this year, which puts them on track to exceed last year’s annual record of approximately $1.2 trillion. This is largely thanks to record profits that allows companies to not only hire more workers and increase their capital expenditures but also to purchase their own shares. In some cases, these shares are very much on sale after significant corrections in certain parts of the market, making it even more enticing to execute buyback programs.
Another important factor for keeping the buyback train rolling is whether or not credit markets remain open. At the moment, they remain fully open for business – March has seen investment grade corporate bond issuance clock in at a whopping $200 billion, the fourth highest monthly total ever. Even with higher interest rates this year, CFO’s can still borrow on relatively inexpensive terms to help fund equity purchases.
Buybacks can’t prevent selloffs from happening, but with earnings estimates continuing to ratchet higher and near-record bond issuance they should remain an important source of demand that can help to dampen further bouts of volatility if they occur. Buyback authorizations are on pace to exceed last year’s record level.
US share buyback authorization announcements ($ billion)
Carl Noble, CFA®
Senior Vice President of Investments
Congress Wealth Management LLC (“Congress”) is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”). For additional information, please visit our website at www.congresswealth.com or visit the Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov by searching with Congress’ CRD #310873.
This note is provided for informational purposes only. Congress believes this information to be accurate and reliable but does not warrant it as to completeness or accuracy. This note may include candid statements, opinions and/or forecasts, including those regarding investment strategies and economic This note is provided for informational purposes only. Congress believes this information to be accurate and reliable but does not warrant it as to completeness or accuracy. This note may include candid statements, opinions and/or forecasts, including those regarding investment strategies and economic and market conditions; however, there is no guarantee that such statements, opinions and/or forecasts will prove to be correct. All such expressions of opinions or forecasts are subject to change without notice. Any projections, targets or estimates are forward looking statements and are based on Congress’ research, analysis, and assumption. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. This note is not a complete analysis of all material facts respecting any issuer, industry or security or of your investment objectives, parameters, needs or financial situation, and therefore is not a sufficient basis alone on which to base an investment decision. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this note. No portion of this note is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Investing entails the risk of loss of principal.