Market Boost Incoming: Record Stock Buybacks Set to Resume as Blackout Ends
Although the market has rebounded 10% from its April 8th low, overall investor sentiment seems to remain cautious, with numerous risk events still on the horizon. However, there's good news: the market is about to welcome a powerful bullish force.
As Q1 earnings reports continue to be released, more and more companies will be exiting their buyback blackout periods. Goldman Sachs' buyback desk estimates that currently about 40% of companies are in open windows, and this percentage will reach approximately 65% by the weekend, rising to 100% by late May. The open period will last until June 30th.
This influx of corporate buybacks could provide significant support for stock prices in the coming weeks, potentially offsetting some of the lingering concerns in the market.
Record Stock Repurchases On Deck
Based on the latest announcements, buyback authorization activity was extremely robust last week: 31 plans were authorized, totaling $85.8 billion. The largest plans launched last week included Google's $70 billion, Ameriprise Financial's $4.5 billion, and Equifax's $3 billion, among others.
Since the beginning of 2025, authorized buybacks have reached $463.3 billion, which is 14% higher than the same period in 2024. The financial sector has once again emerged as the most active sector, followed by communication services and technology.
Goldman Sachs' latest forecast predicts that total buyback authorizations for 2025 will reach a record-breaking $1.35 trillion, with executed buybacks expected to hit $1.06 trillion. These figures represent increases of 7% and 6.2% respectively compared to the previous year. The record-setting forecast for buyback authorizations could be seen as a positive indicator for overall market health and corporate financial strength.
Tax Cut Plan to Further Boost Corporate Buybacks
The highest U.S. corporate tax rate decreased from 53% in 1942 to a maximum of 38% in 1993. Following the passage of the Tax Cuts and Jobs Act on December 20, 2017, the corporate tax rate was reduced to a flat 21% effective January 1, 2018.
This reform provided companies with more cash for stock buybacks. Additionally, the law allowed corporations to repatriate overseas profits at a lower tax rate, further increasing funds available for share repurchases.
In 2018, S&P 500 companies' stock buybacks totaled approximately $806 billion, a 55% increase from 2017. Tech, finance, and healthcare sectors led with massive repurchases. For instance, Apple announced a $100 billion buyback plan that year.
Trump promised during his campaign to cut the corporate tax rate to 15% for companies producing in the U.S. If implemented, this would boost stock buybacks, though not as dramatically as the 2017 tax cuts.
Even without considering buybacks, the tax reduction could boost EPS by about 4%, according to $Bank of America(BAC)$
Buybacks Not a Cure-All
While the absolute amount of stock buybacks appears substantial and growing, it seems that the expansion of the U.S. stock market valuation is outpacing it. Consequently, the buyback yield shows a downward trend.
Moreover, buybacks clearly won't be enough to offset downward pressure when systemic risks arise. For example, in 2008 and 2022, financial crises and runaway inflation led to market confidence collapsing.
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