Share Buybacks Steady Market

by Laura Ehrenberg-Chesler on May 10, 2018

in Earnings,equity market,Investment Strategies,taxes

The new tax code overhaul, signed into law in late 2017, has encouraged companies to repatriate over $2 trillion in overseas cash. Some of that cash has gone into research and development as well as capital equipment purchases. But, a lot of that cash has gone into share repurchases. These buybacks have helped to steady the market during a period of increased volatility.

From Dow Jones today:
Share repurchases can play a key role in supporting stock prices because they lower companies’ outstanding share counts–driving up per-share earnings even without profit growth.”

The good news is, so far, profit growth has been outstanding. Sales, earnings and revenue for many companies that have reported have exceeded expectations. In addition, their forward guidance has been raised and is positive for the foreseeable future. Rather than being at peak earnings and profit, perhaps we are only in the middle of a period of healthy growth and modest inflation.

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