Did The Buyback Boom Just Go Bust?

Takeaway: After hitting a post-recession high, S&P 500 company share buybacks fell -6.8% y-o-y in the second quarter.

Did The Buyback Boom Just Go Bust? - bull1

is the tide turning?

 

Consider this. After hitting a post-recession high in 2Q16, FactSet reports today that S&P 500 buyback activity tumbled -6.8% year-over-year in 2Q16. 

 

Here's the key excerpt and chart from the FactSet data:

 

"Companies in the S&P 500 spent $125.1 billion on share buybacks during the second quarter, which marked the smallest quarterly total since Q3 2013. This comes after a first quarter that saw buybacks for the index hit a new post-recession high. Aggregate buybacks in Q2 represented a 6.8% decline from the year-ago quarter, which was the largest year-over-year decrease since Q1 2015. This Q2 decline came during a quarter that saw the S&P 500 index hit record-high price levels. On a trailing twelve-month basis, shareholder buybacks amounted to $592.9 billion at the end of the second quarter. This was a 6.8% increase from the same time period a year ago. The TTM buyback total at the end of Q2 marked the fourth largest amount going back to the start of 2005, despite this quarter’s decline."

 

Did The Buyback Boom Just Go Bust? - buyback 9 20

 

This dour question mark is a far cry from the headlines we saw just two months ago when the buyback boom was cited as justification for why the S&P 500 was hitting all-time highs. Indeed, as the Wall Street Journal wrote, "There's No Need To Fear the Buyback-Boosted Stock Market." 

 

We advised otherwise, here(Note: The S&P 500 is down -0.9% since then.)

 

***To understand why we think buybacks, corporate profits, consumer confidence, the labor market etc, etc, etc, are all past peak and U.S. growth continues to slow, watch this 6-second animated clip Hedgeye CEO Keith McCullough in "An Animated History of U.S. #GrowthSlowing" below.