• 3 days The New World Tax Order
  • 4 days Is Crypto Finally Ready To Pay The Piper?
  • 5 days Is It Time To Buy The Global Gaming Market Dip?
  • 8 days Even The Mafia Has A Millennial Problem
  • 10 days Zuckerberg Loses Billions in Social Media Outage
  • 11 days ‘Pandora Papers’ Leak Reveals More Financial Crime
  • 12 days US Retail Has A Major Supply Chain Problem
  • 15 days China Has Set Out To Crush Crypto...Again
  • 16 days Top Performing Cannabis Stocks of the Year
  • 17 days Millennials Could Power A 20-Year Bull Stock Market
  • 22 days The Million-Dollar Question: Will China Bail Out Evergrande?
  • 24 days 3 Restaurant Stocks In Full Recovery Mode
  • 24 days Bitcoin Is Driven By Testosterone
  • 29 days Quantum Computing Is The Newest Megatrend In Silicon Valley
  • 30 days How To Invest In The Cybersecurity Boom
  • 32 days Investors Are Patient With Unprofitable Giants
  • 34 days Wells Fargo Back In The Scandal Spotlight Once Again
  • 36 days 5 Stocks To Keep A Close Eye On This Year
  • 37 days As Auto Giants Flail, Look To Chip Stocks For Gains
  • 38 days Central America Is Ready For The Bitcoin Hustle
What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

  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