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US companies are planning to buy back a record $500bn of their own shares, as they seek to deploy their huge cash piles at a time when President Donald Trump’s policies are adding to uncertainty over making capital investments.
Companies listed on the blue-chip S&P 500 index said last week they expect to repurchase $192bn of their stock over the coming months, the highest weekly figure in data going back to 1995, according to Deutsche Bank.
The tally of announced buybacks over the past three months has now risen to $518bn — the biggest rolling three-month sum on record, the bank said.
The rush of repurchases comes as a better than forecast start to earnings season leaves US companies flush with cash. With corporate outlooks clouded by uncertainty over trade tariffs, many have been attracted by share prices that, despite a recent rebound, are still lower than at the beginning of the year.
“The numbers are spectacular,” said Brian Reynolds, chief market strategist at Reynolds Strategy, who ditched his bearish forecast for large-cap US stocks given the “size and rapidity of [last week’s] buyback surge”.
Trump’s unconventional trade manoeuvrings have in a number of cases made planning for the future more difficult, forcing groups such as Colgate, General Motors and Delta Air Lines to cut sections of their earnings guidance.
Rising buybacks are “a reflection of the fact that global tariff uncertainty is getting in the way of planning for operational investment”, said a former co-head of equity capital markets at a large US investment bank.
“If the stock price has come down, managements have air cover to spend cash on buybacks and increase [earnings per share],” the person added.
The S&P 500 recorded its best daily winning streak in 20 years to Friday — which some analysts have in part attributed to the rush of buyback announcements — but slipped on Monday and Tuesday.
Buybacks have become increasingly popular since Trump’s corporate tax cuts in 2017 left them with more cash, with repurchases by S&P 500 companies setting an annual record of $942.5bn last year, according to S&P Global.
Repurchases can be an attractive option for companies if they believe a market sell-off has left their stock undervalued. Repurchases boost profitability on an earnings per share basis — a figure watched by many Wall Street analysts — by lowering the number of shares in circulation.
However, some academics and politicians argue that dry powder could be better spent on investment or higher wages.
Financials and tech groups have been among the most active players. Apple last week said it planned to increase share buybacks by $100bn, weeks after Google parent Alphabet said it would spend $70bn on a similar programme.
Wells Fargo said it planned to buy back $40bn worth of stock, while Visa is set to snap up an extra $30bn of their shares. Energy majors, utilities and materials groups, in contrast, have largely kept to the sidelines.
Strategists say stronger than anticipated first-quarter earnings have helped drive the buyback boom. S&P 500 companies so far have beaten expected earnings per share by 7.8 per cent, according to JPMorgan, “well above” the bank’s estimate of a 4-to-5 per cent surprise.
“The record-setting [buyback] surge this quarter underlines . . . that earnings beats and growth in [the first-quarter] remained solid, and companies have indicated that they are not going into the bunker just yet,” said Deutsche strategist Parag Thatte.
The trend could be set to continue, with Apple and AIG tapping the bond market on Monday. Reynolds at Reynolds Strategy said at least some of the money raised is likely to be used to repurchase stock.
“People are willing to lend [these companies] money in the midst of a tariff battle,” he added. “And the amount of money is immense.”