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U.S. companies are on pace to buy back more of their shares than they did during 2018's record binge, data shows, despite — or perhaps because of — mounting political opposition.
Through March 15, American companies had bought $253 billion worth of their own stock, according to data compiled by Michael Schoonover, COO of asset manager Catalyst Funds.
Why it matters: Companies are continuing to choose buying back their stock to reduce the number of shares outstanding and boost prices over investing in long-term capital and labor expenditures. Last year, companies spent more buying back their own stock than on capex for the first time since 2008, according to Citigroup.
The big picture: Massive buybacks are likely a major reason equity prices and bond prices are both moving higher, shedding their historically inverse relationship.
What's next? The impact of the Tax Cut and Jobs Act on the real economy is expected to recede this year, but Schoonover tells Axios he is expecting it to continue to boost stock buybacks for years to come, as companies have already shown that's how they will use the tax cut windfall.
Further, as of September 2018, only $143 billion of the more than $2.5 trillion held overseas by U.S. companies had been repatriated to the U.S., which was a major part of the tax bill.
The bottom line: Last year was a wake-up call for companies that didn't turn their tax cut savings into buybacks and saw their share prices fall, Schoonover adds. Many have already shown they won't be making that mistake this year.
Through the first quarter of 2019, a number of industries have already seen buybacks that are as much as 40% or more of their full year total for 2018. The energy sector has bought back shares that total 71% of last year's spend.
"A number of industries didn’t participate as actively in buybacks last year. These industries have been a lot more active this year," Michael Schoonover, COO at Catalyst Funds tells Axios.
Today is the last trading day of the quarter and stocks around the globe have essentially recouped all losses from the final three months of 2018, Axios' Courtenay Brown writes.
The big picture: Not a single major index ended 2018 in the green but stocks have rebounded, despite intensified fears about a slowing global economy.
Bonus: The S&P 500 is on pace for the best quarterly percentage gain in nearly 10 years, per CNBC.
There was a flurry of U.S. housing data this week that painted a negative picture of the economy, but showed signs for potential growth.
The bad news: Building permits fell for the second straight month and housing starts had their largest decline in 8 months, according to U.S. government data. Construction of single-family homes dropped to its lowest in more than 18 months.
What they're saying: Tendayi Kapfidze, chief economist at LendingTree, says the slowdown is actually a good thing.
He points out that homebuilder confidence readings show expectations of strong demand in the months ahead. However, the sub-index for buyer traffic fell to 44, indicating contraction.
The good news: U.S. mortgage rates had their biggest one-week drop in 10 years, with 30-year mortgage rates falling 22 basis points.
Source: Federal Reserve, National Bureau of Economics Research; Chart: Cambridge Global Payments.
In addition to the inverted yield curve, there's another recession indicator Americans should be watching, analysts say.
The value of corporate equities that households and non-profits own as a share of U.S. GDP fell from its highs at the end of the year. It dropped in the last quarter of 2018 as equity prices fell and households sold shares.
Why it matters: While prices have largely climbed back, households are still holding off on buying. Much of 2019's pickup in stock prices has been driven by corporate buybacks.
The bottom line: "Sharp upward spikes in household equity valuations have often preceded recessions," Karl Schamotta, chief market strategist at Cambridge Global Payments, tells Axios.