As firms prepare for quarterly earnings season, stock buybacks in the United States appear to be setting new records, despite concerns from some investors about the rising threat of inflation, a potential recession, and stagnating share values.
According to financial data provider EPFR, Informa Financial Intelligence, new repurchase announcements by US corporations reached over $300 billion in the first quarter, with March showing a high year-over-year increase, indicating that buybacks have remained resilient in recent weeks.
Stock buybacks, which have been a key contributor to Wall Street’s profits in recent years, will be in the limelight when the findings are released. When companies are optimistic about the future and believe their stock prices are undervalued, they often buy back their shares.
Investors are concerned about inflation and the impact of a recession on business outlooks, which might dampen companies’ desire to return money to shareholders through large buybacks and dividends.
Chief Executive Officer Jamie Dimon of JPMorgan (JPM.N) announced on Monday that his bank would reduce stock buybacks during the next year to meet capital requirements set by federal regulations.
Also on Monday, Starbucks Corp (SBUX.O) announced that it would halt billions of dollars in stock buybacks in order to spend more on employees and stores at a time when the coffee retailer’s workforce in the United States is becoming increasingly unionized.
“These aren’t one-offs, in my opinion. I believe you’ll see more companies slow down their buybacks and become more like they were in early 2020, thinking about “how much cash do I need on my balance sheet to weather this particular storm if we do go into recession?” “Art Hogan, the chief market strategist at National Securities in New York, predicted this.