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Waning Stock Buybacks: Should Investors be Worried?
(Note: companies that
could be impacted by the content of this article are listed at the base of the
story [desktop version]. This article uses third-party references to provide a
bullish, bearish, and balanced point of view; sources are listed after the
Balanced section.)
On April 3rd, Channelchek posted an article entitled “Stock Buybacks: Good, Evil, or Maybe Something In Between?” highlighting not only the significant rise in buybacks, but also the increasing concerns voiced by various parties regarding stock buybacks. Now, in a note to clients, Goldman Sachs recently warned that corporate buybacks are “plummeting” and it could have a big impact on the market. (1) According to the investment bank, in the second quarter of 2019 the S&P 500 share buybacks totaled $161 billion, about 18% less than the first quarter. Year-to-date, buybacks are down some 17%. For 2019, Goldman Sachs estimates total buybacks will drop 15% to $710 billion, with an additional 5% decline in 2020. (1) Assuming Goldman’s forecast is accurate, should investors be concerned?