My Comments: This is important if your financial future depends to some degree on retirement accounts that include investments in the stock and bond markets. If you think the turmoil is going to end soon, you should perhaps think again.
Bob Bryan March 11, 2016
Since the beginning of the post-crisis bull-market run (2009), the biggest buyer of equities hasn’t been retail investors or institutions but companies themselves.
Companies have been supporting the stock market through buybacks for years.
But according to some analysts, the era of buybacks may be coming to a close.
And this could be terrible news for the stock market.
According to a note from analysts at HSBC, buybacks have been the source of most of the demand for stocks since 2009.
The note said that for each of the past two years, companies in the S&P 500 have bought back nearly $500 billion of their own stock and a total of $2.1 trillion since 2010.
This huge amount of buying has been a massive source of upside for the stock market, said Liz Ann Sonders, chief investment strategist at Charles Schwab.
“There’s no question that by far corporate buybacks have been the source of most of the buying in the stock market,” Sonders told Business Insider on Wednesday. “On a cumulative basis there has not been a dollar added to the US stock market since the end of the financial crisis by retail investors and pension funds.”
Jonathan Glionna, equity strategist at Barclays, laid out just how important this has been to equity markets, comparing the boost from buybacks to the Fed boosting the bond market through quantitative easing.