After Apple's massive buyback last week stunned the market, Deutsche Bank's latest research shows that the size of buybacks in the US stock market has surged to the highest in nearly six years in the past three months.
This indicates that American companies have become increasingly optimistic about the prospects of the US economy, and this trend will also be beneficial for further boosting US stocks.
The scale of US stock repurchase reached a new six-year high
Deutsche Bank research shows that in the past 13 weeks, the amount of stock repurchases announced by US stock companies has exceeded $383 billion, a 30% increase from the same period last year and the largest amount since June 2018.
Of course, Apple has made a huge contribution to this: earlier this month, Apple announced a $110 billion buyback plan, which is the largest buyback plan in history. In addition to Apple, Google's parent company Alphabet also announced a $70 billion aggressive buyback plan at the end of last month.
The stock strategy team of Deutsche Bank pointed out that the "boom" in stock repurchases is not limited to large companies such as Apple and Alphabet. In the first quarter financial reporting season, US stock companies announced a total of $262 billion in buybacks, of which $82 billion came from companies outside of large tech giants.
Helping to further boost the US stock market
For those who hope for a wider rise in the stock market, this is a welcome sign.
Binky Chadha, Chief Equity Strategist at Deutsche Bank, said, "In the medium term, buybacks have always been the biggest driving force in the stock market."
Elyse Ausenbaugh, global investment strategist at JPMorgan Chase Private Bank, also pointed out that the increase in stock repurchases is; Quota; Investors provide a solid foundation; Quota;, Because repurchasing stocks by companies helps support the market.
Furthermore, Ausenbaugh believes that as a company's cash flow increases, it will not only be repurchased, but also used in ways that ultimately benefit shareholders, such as increasing capital expenditures for large technology companies: "The increased capital expenditures will continue to drive these trends that are conducive to supporting the market, such as artificial intelligence."
US stock companies cast a vote of confidence in the economic outlook
In Chada's view, the importance of repurchase is clear: it most directly expresses the company's view on the macro environment to investors.
Chada stated that when a company's profits increase, buybacks usually increase. This is because as a company's profits grow, its cash flow also increases. Then, the company can use these cash flows to increase dividends paid to shareholders, increase capital expenditures to invest in the company, or repurchase stocks.
This trend was not achieved in 2023. In 2023, although profits of American stock companies have rebounded, the scale of stock repurchases has not increased. Chada believes that this may be related to the expectation of the vast majority of people at the time that the US economy would fall into recession.
&Amp; Quota; When the macro consensus is that the economy is severely slowing down or declining, companies will not engage in buybacks; Quota; Chada explained, "They will continue to hold cash."
But this macro consensus has now undergone a transformation. As many economists and macro strategists feel more optimistic about the economic growth of the United States this year. The company is confirming this confidence through buybacks.
Chada said, "Since the fourth financial reporting season earlier this year, we can already see a trend of buybacks starting to rebound... So I want to say that this cyclical cloud is dissipating. Companies are becoming more and more confident about the outlook."