The Secret Buyer Propping Up The Stock Market

When times are good, they are really good!

But why is this? As companies are experiencing record growth in earnings and profits, they are taking a significant portion of that profit and buying shares in their own companies. This is known as corporate buybacks, or as Goldman Sachs calls it, ‘the buyback bonanza.’

But why now? Is this time different than other times in the past? Check out this video to learn more:

 

Does that mean the inverse is also true? When things are bad, they are really bad? Well, yes. During the Great Recession, and during the pandemic as well, corporate buybacks came to a screeching halt.

Source: Standard & Poor’s

So why now?

  • Corporate cash and corporate profits are surging.
  • CEO confidence, as measured by The Consumer Board, is at an all-time high.
  • Only recently have US banks been allowed to increase their buyback programs.

To put all of this in context, Jamie Dimon, CEO of JPMorgan, announced a $30 billion buyback program in December and explained it by saying, “we’re buying back stock because our cup runneth over.”

When things are good, they are really, really good.

Barry Glassman, CFP®
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