• 9 hours Fake News Is A New Virus Without A Cure
  • 13 hours The Countries Hit Hardest By COVID-19
  • 15 hours China's $700 Billion Infrastructure Package Sends Copper Soaring
  • 16 hours Are Investors Ignoring The Largest Financial Risk Ever?
  • 1 day Americans Are Counting On Another COVID Stimulus Check
  • 2 days What's Next For Hong Kong?
  • 2 days Bitcoin Fails To Stay Above $10,000
  • 3 days Bill Gates And Big Oil Chase The Dream Of Nuclear Fusion
  • 3 days Top Jeweler To Use Only Recycled Gold And Silver
  • 3 days America’s Multi-Front Meltdown
  • 4 days Gold Up As U.S. Civil Unrest Escalates
  • 4 days How BlackRock Became King Of ESG Investing
  • 4 days Americans Don’t Care if TikTok Is A Security Threat
  • 6 days What’s Next In The Trump vs. Twitter Drama?
  • 7 days Escalating Tensions Could Crush $52 Billion China-U.S. Energy Deal
  • 7 days The Fed Is Printing Money At Unprecedented Levels
  • 7 days How Is The Real Estate Market Handling COVID-19?
  • 7 days Gold Flat As Markets Await Fed Chair Speech
  • 8 days What Is Day Trading And Is It Right For You?
  • 8 days Energy CEOs See Big Payouts Despite Oil Price Crash
Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

  1. Home
  2. Markets
  3. Other

Buybacks Dominated Stock Activity In The First Half Of 2018

Trump

While it is well known that stock buybacks have been among the primary contributors for the solid stock performance in the U.S. in 2018, largely thanks to Trump's tax reform which allowed companies to use repatriated cash to repurchase stock, the following "chart of the week" from Bank of America one week ago shows just how pervasive the buyback wave had been so far in 2018, as the bank's clients deployed record amounts of cash to repurchase their own stock.

(Click to enlarge)

One week later, BofA's Client Flow monitor provides an update and finds that ahead of the earnings season blackout, buybacks by corporate clients have slowed down modestly to a six-month - in line with seasonal patterns - but YTD still remain +101 percent YoY and continue to suggest a record year for buybacks.

But while corporate buybacks may be fading into earnings, it is total buyback activity throughout the first half of 2018 that reveals a surprising picture. As shown in the most recent "Chart of the week" from BofA, which lays out first half sector flows, corporate clients’ buybacks were the largest buyers within Financials ($10.6bn), Tech ($10.5bn), Health Care ($6.5bn), Consumer Discretionary, and Industrials.

In fact, in a dramatic display of just who has been buying tech stocks, BofA reveals that "net buying of Tech in the 1H was entirely buyback-driven."

So much for speculation that hedge funds and institutions have been chasing after tech performance: it was just tech companies - at least the subset which operates via Bank of America's buyback desk - repurchasing their own stock. And not just tech companies but financials, industrials and discretionary. Related: The Best Paying Jobs Aren’t In Silicon Valley

Meanwhile, single stocks have been uniformly sold across all sectors with the sole exception of industrials, which is the one sector with 1H flows into single stocks by both corporate and non-corporate clients along with sector ETFs.

(Click to enlarge)

So if BofA's corporate clients were the overwhelming buyers of stock in the first half, that would mean that all other clients were selling.  And sure enough, as BofA writes, while private clients - or ultra-high net worth individuals - were the sole net buyers of U.S. equities in a token amount (in addition to corporates) in the 1H, institutional clients were the biggest sellers, while hedge funds were also net sellers for the duration of the quarter.

(Click to enlarge)

To summarize:

(Click to enlarge)

This means that as many have suspected without buybacks, there will be little buying pressure on stocks. Which is a problem because with just days left until buyback blackout period, the buyer of last resort for U.S. stocks is about to go on a month-long vacation, just as the trade war between the U.S. and China begins.

By Zerohedge.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment