The stock market decline comes despite a record level of buybacks — more than $200 billion in the last quarter alone, up some 58% from a year ago.
Why it matters: It's a lot easier for companies to reduce buybacks than it is for them to reduce dividends. If and when earnings start to decline, it should be quite easy for buybacks to fall in tandem.
- Buybacks are rising mainly because companies have been very cautious about raising their dividends. If you look at the level of dividends and buybacks combined, it tracks very closely with total corporate earnings, which have been growing impressively.
- In 2007 and 2015, earnings fell below the amount that companies were spending on buybacks and dividends. That's no longer the case.