Chart of the week: US stocks’ buyback boost is fading
It’s clear that share buybacks have given America’s S&P 500 index a “big boost” over the past few years. But that tailwind for US equities is abating.
It's clear that share buybacks have given America's S&P 500 index a "big boost" over the past few years, says Capital Economics. The practice gives equity prices a fillip by increasing earnings per share and adding to the number of buyers in a market.
The S&P 500 Buyback index, which follows the 100 shares with the highest buyback ratios, soared by 240% between early 2009 and the start of 2015. Since then, however, it has underperformed the S&P a relatively rare occurrence, as the bar chart shows. The upshot is that an important tailwind for US equities is abating.
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