As US equity indexes soared to all-time highs over the summer, traders were left in slackjawed wonder by stocks' resilience to every market negative, including a burgeoning trade war with China and outflows from nearly every ownership category.

At the time, analysts attributed this behavior to the robustness of the Trump economy and the profit boost of the Trump tax cuts. But we dared to posit another explanation that somehow slipped below Wall Street's radar: Citing research from Goldman and BofA, we pointed out that after notching a quarterly record in Q2, the pace of corporate buybacks accelerated in Q3. And while investors celebrated Apple's stunning market milestone, Goldman's David Kostin argued that markets were asking the wrong $1 trillion question.

この夏米国株式市場は過去最高となった当時、市場のマイナス要因が多い中でトレーダーは口を開けて呆れるばかりだった、中国との貿易戦争は高まり、ほとんどの投資家分類から資金流出していたのにだ。当時、アナリストはこの動きはトランプ経済の強さであり大幅減税のおかげだと解説していた。しかしZeroHedgeはあえてWall Streetが言及しない別の理解をしていた:GoldmanとBoAの調査を元にしているが、ZeroHedgeはQ2の四半期記録がさらにうわ待っていることを指摘した、Q3に自社株買いのベースが加速していたのだ。投資家がAppleの驚くべき市場の一里塚を称賛していたとき、GoldmanのDavid Kostinは市場の$1Tの疑念を表明していた。

Four months later, the boost from Trump's tax cuts is fading, stocks can't keep a bid and S&P Dow Jones Indices just confirmed something we had long suspected (something that was driven home once again by Oracle's earnings report last night): Namely, that the most important factor in US markets this year has been the corporate bid. That's because, after clinching a quarterly records in Q1 and Q2, members of the S&P 500 went on to set another quarterly record for share repurchases in the Q3.



That's right: S&P revealed on Tuesday that quarterly S&P 500 share repurchases surpassed the $200 billion mark for the first time in Q3 o a record $203.8 billion. That's the third straight quarterly record for share buybacks, displacing the prior quarterly record of $190.6 billion, set during Q2 2018.


This year's Q3 figure represents an increase of 57.7% from the $129.2 billion from Q3 2017. Through the end of the third quarter, buybacks are up 52.6% to $583.4 billion from the prior year's $382.4 billion, leaving the annual total just 1% shy of the previous annual record of $589.1 billion set in 2007. And that's with another quarter left to report (though, judging by the price action, it's probably fair to assume that the pace of purchases has slackened somewhat, though Boeing and Johnson & Johnson each announced buybacks this week to boost their sagging shares).


For the 12-month period ending September 2018, S&P 500 companies spent a total of $720.4 billion on buybacks, up 39.1% from $517.7 billion during the corresponding period from 2017.


The total shareholder return via buybacks and regular cash dividends increased 5.7% to $319.5 billion, up from $302.2 billion for Q2 2018 and up 26.2% from the $234.6 billion for Q3 2017. For the 12-month period ending September 2018, shareholder return totaled $1.166 trillion, up 25.2% from $931.9 billion for the 12-month period ending September 2017.


Meanwhile, the percentage of companies that saw a substantial reduction in their float (at least 4% year-over-year) climbed to 17.7%, up from the prior quarter's 15.4%. That's the highest since the 19.4% posted in Q4 2016.




And what's driving these buybacks? Simple: Just as we  anticipated, companies are using their tax-cut savings to buy back their shares.


"Companies have used their tax savings to push up discretionary buybacks and boost earnings through significantly reduced share counts," said Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices. "Adding to the impact, Q4 average issue prices have declined 3.3% which would increase the number of shares a company can buy with the same expenditure and further increase the EPS tailwind."

「企業は減税で得た資金を自社株に注ぎ込み一株あたりの利益を増やしている、」とHoward Silverblattは言う、彼はS&P DJI指数の上級アナリストだ。「このインパクトに加え、Q4の平均発行価格は3.3%減った、ということは同じ予算では多量の株式を変えるわけで、さらにEPSの見かけを良くする。」

These companies spent the most on buybacks during Q3:


  • Qualcomm led in buybacks, spending $21.2 billion in Q3 2018, ranking third on the top 20 S&P 500 historical list, up from $1.1 billion spent for Q2 2018

  • Apple reported $19.4 billion in Q3 2018, down from $21.9 billion spent for Q2 2018, as the quarter ranked fifth highest historically; Apple holds seven of the top eight positions for buybacks historically, spending $224.2 billion over the past five-years.

  • Oracle: $10.3 billion for Q3 2018, up from $5.0 billion for Q2 2018 and $0.8 billion for Q3 2017.  

  • Wells Fargo: $7.4 billion for Q3 2018, up from $2.9 billion for Q2 2018 and up from $2.6 billion for Q3 2017.

  • Cisco Systems: $5.4 billion for Q3 2018, down from $6.1 billion for Q2 2018 and $2.0 billion for Q3 2017.

The big question is - with the cost of funding soaring in Q4, will the C-suite keep running their firms' leverages to ever higher highs to ensure their remuneration packages remain full...