The largest buyback wave in the history of the U.S. stock market has arrived! In the face of uncertainty, companies choose to "buy the dip" on themselves

Faced with the uncertainty brought about by the Trump administration's policies, American companies are repurchasing their own stocks at an astonishing rate.

According to Deutsche Bank data, S&P 500 constituent companies are expected to repurchase $192 billion worth of stocks in the coming months, marking the highest weekly record since 1995. The total amount of repurchases announced in the past three months has soared to $518 billion, setting a historical high.

This indicates that under the shadow of uncertain factors such as trade tariffs, companies are more inclined to deploy their massive cash reserves through buybacks.

Brian Reynolds, chief market strategist at Reynolds Strategy, stated that due to the "scale and speed" of last week's buyback wave, he has abandoned his bearish forecast for U.S. large-cap stocks.

Massive Buybacks: Cash is King for Companies

Despite a recent market rebound, many companies' stock prices remain below the levels at the beginning of the year due to trade friction.

"If stock prices fall, management has a reason to use cash for buybacks and increase earnings per share," said a former co-head of equity capital markets at a major U.S. investment bank. The increase in buybacks "reflects that global tariff uncertainties hinder operational investment planning."

The unexpected trade measures from the Trump administration have made it more difficult for companies to plan for the future. Companies including Colgate, General Motors, and Delta Air Lines have had to cut their profit forecasts. This has partly prompted companies to use cash for buybacks rather than capital investments.

Financial and technology companies are the main forces in the buyback army. Apple announced last week that it plans to increase its stock buyback by $100 billion, while Google's parent company Alphabet also stated it would spend $70 billion on a similar plan. Wells Fargo plans to repurchase $40 billion worth of stocks, and Visa will also buy back an additional $30 billion worth of stocks. In contrast, the energy, utilities, and materials sectors have largely remained inactive.

Driven by buyback news, the market experienced a brief honeymoon period. The S&P 500 index set a record for the best single-day winning streak in 20 years last week. However, the market declined on Monday and Tuesday.

Industry Giants Actively Participate, Buyback Trend May Continue

Since the Trump administration implemented corporate tax cuts in 2017, corporate cash flow has significantly increased, making buybacks more common.

According to S&P Global data, S&P 500 companies' buybacks reached a record $942.5 billion in 2023. For those who believe that the market sell-off has led to undervalued stocks, buybacks are an attractive option. By reducing the number of shares outstanding, buybacks can increase earnings per share, a key metric closely monitored by Wall Street analysts.

Data from JP Morgan shows that S&P 500 constituent companies' earnings per share exceeded expectations by 7.8% in the first quarter, far surpassing the bank's estimate of 4% to 5%.

Deutsche Bank strategist Parag Thatte stated that the record buyback wave this quarter "highlights the robust earnings growth in the first quarter, and companies are not yet prepared to enter 'the bunker'." **

It is worth noting that Apple and AIG financed through the bond market this Monday. Reynolds believes that some of the funds are likely to be used for stock buybacks:

"In terms of tariffs, people are still willing to lend to these companies, and the amount of funding is substantial."