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Illustration: Rebecca Zisser/Axios
After buying back more than $1 trillion of their own stock last year, public companies are slowing their share repurchases in 2019, and that will add to troubles for the market and the economy.
Why it matters: Buybacks have been a major catalyst for the market’s rise in recent years and remain an important driver of higher prices, as earnings growth has slowed and investors have become net sellers of equities.
By the numbers: The record buyback binge in 2018 accounted for almost half of stocks' EPS growth, the highest share since 2007.
What they're saying: In a recent note to clients, BAML strategists said they see late 2018 as “the turning point in this cycle of expanding debt balance sheets, buying growth and rewarding shareholders.”
The big picture: Companies are preparing for the economy to slow and want to pare debt and hold cash in the event of a downturn.
The buyback math is simple, David Lebovitz, global market strategist at J.P. Morgan Asset Management, tells Axios.
Yes, but: This is not the death of share buybacks, by a long shot, Lebovitz adds.
The bottom line: Uncertainty about the Fed's interest rate outlook and the trade war aren't helping, either.
The stock market rebounded Wednesday, with major U.S. indexes finishing the day slightly higher or little moved from where they opened, but prices on safe-haven assets like gold, the Japanese yen and U.S. government debt continued to rise.
What happened: Gold prices rose to a 6-year high, above $1,500 per troy ounce, while the yen broke through 106 per dollar, nearing a 5-month high, and U.S. Treasury prices rose, taking down yields on the benchmark 10-year note below 1.6% in early trading.
But, but, but: Stock traders are still buying the dip. When President Trump again escalated the trade war by threatening new tariffs on China last week, Bank of America Merrill Lynch strategists said investors were "big net buyers" of U.S. equities. The bank saw its second highest equity net inflows on record.
Be smart: The continued momentum of assets seen as safe has heated up and looks poised to continue.
The housing market slump continues, and one little-discussed driver has been the increasing share of housing owned by investors who are looking for financial gains rather than a place to live.
Details: Private equity firms, real estate speculators and other investors made up more than 11% of U.S. homebuyers in 2018, the highest percentage on record and significantly higher than the level seen before the 2008 housing crash, according to recent data from CoreLogic.
The big picture: The supply of starter homes is already historically low and with prices continuing to rise and young potential buyers more indebted than ever, there's little sign that the struggles in the housing market will correct in the near-term, analysts say, even with low mortgage rates.
Wednesday marked 1 year since Tesla CEO Elon Musk told the world he was thinking of taking Tesla private and had funding secured to do so.
How'd that work out for him? The tweet almost immediately resulted in shareholder lawsuits and scrutiny from the SEC that ended in $40 million in fines and a settlement.
In the year since Musk’s infamous tweet, not only has funding still not been secured, Tesla largely has failed to deliver the profitability Musk promised, Quartz's Michael J. Coren notes.