Source: Zhitong Finance
Author: Rousseau

Driven by American consumer electronics giant Apple's record share repurchase announcement and strong confidence in business expectations, more and more US companies are disclosing stock repurchase plans that far exceed market expectations. According to statistics compiled by Birinyi Associates, in May of this year alone, the total repurchase plan disclosed by US companies reached 2010 billion US dollars. This is the largest share repurchase of all 5 months in history since statistics were recorded. According to the data, this figure surged more than 41% from the same period last year, and ranked fifth in all months since records began.

Since the end of March, unfavorable factors such as huge uncertainty about the Federal Reserve's interest rate cut path, geopolitical tension, and high US inflation have successively hindered the upward trend of US stocks, but the extremely optimistic promises of US companies to buy back stocks may continue to provide a strong “long-term bull market catalyst” for the US stock market. This also represents a vote of confidence cast by the board of directors of listed companies, that is, the scale of the company's operations can provide sufficient cash flow to pay for share repurchases to increase shareholder returns.

US companies officially announced a record monthly repurchase commitment of up to 2010 billion US dollars. It can be described as the core driving force driving the US stock benchmark index, the S&P 500 index, which has been weak since the beginning of April, to reach an all-time high in May. This huge share repurchase promise gave believers in the US stock market more optimistic and passionate bullish sentiment. By the close of May, the S&P 500 index had risen about 11% so far this year. In May, the index reached an all-time high of 5341.88, with a monthly increase of 5%.

The repurchase announced by Apple was the largest share repurchase plan officially announced in May. Furthermore, in the first quarter of this year, statistics showed that the completed repurchases by S&P 500 companies reached 2020 billion US dollars.

Jeff Rubin (Jeff Rubin), head of research from Birinyi Associates, said in an email: “This is a very clear sign that American companies are very satisfied with their ability to generate free cash flow.”

Apple accounts for more than half of the total monthly repurchase commitments made by US companies in May. The tech giant announced that it would repurchase shares worth up to 110 billion US dollars, the highest in the company's stock repurchase history, and even the largest repurchase in US stock repurchase history.

In addition, statistics also show that the total number of US corporate stock repurchase announcements from January to May 2024 ranked second in all the first five-month statistical periods. Despite the large scale of Apple's repurchase program, the listed companies covered by these announcements covered a wide range of industries, and the total number of US companies that have disclosed plans since this year is the second highest since records began.

The surge in the scale of planned corporate repurchases can be described as occurring at the same time as the implemented share repurchases. According to the data, in the first quarter of this year, S&P 500 companies have repurchased a total of shares worth more than 2020 billion US dollars. This is the largest share repurchase scale since the third quarter of 2022. At that time, the benchmark index plummeted by as much as double digits.

One of the “long driving forces” of US stocks: the scale of US stock market repurchases is expected to exceed trillion US dollars in 2025

Wall Street bank Goldman Sachs (Goldman Sachs) predicts that the scale of stock repurchases in the US stock market will surpass the $1 trillion mark for the first time in 2025, mainly due to the resilience of the US economy. Coupled with the strong profit growth trend of major technology companies such as Apple, Nvidia, Microsoft, and Google, and the easing expectations of the global financial environment in the context of the Federal Reserve seeking interest rate cuts, are clearly optimistic compared to the previous two years.

This major Wall Street investment bank recently predicted in a research report that the cumulative share repurchases of S&P 500 companies will increase 16% to $1.1 trillion in 2025, and 13% to US$934 billion in 2024. After entering a “technical bull market” in 2023, US stocks continued to advance rapidly in 2024, and such a large scale of repurchases will undoubtedly become one of the core catalysts for the bullish trend of US stocks.

Goldman Sachs said that US companies are returning to the stock market as the largest buyers of US stocks and are preparing to drive the next upward wave in the US stock market. As the Federal Reserve sends a signal that interest rates may remain high for a longer period of time than expected to curb high inflation, investors are hoping that the buyback boom will drive the bullish enthusiasm of the market, which in turn will drive the bullish trend of US stocks repeatedly reaching new highs.

Goldman Sachs technical analyst Scott Rubner (Scott Rubner) wrote in the report that of the 934 billion US dollar share repurchases expected this year, up to one-sixth are expected to be successfully executed in May and June.

Since the beginning of this year, the scale of US stock buybacks has greatly rebounded, and the big tech giants can be called “big leaders.” Apple said in May that the company's board of directors approved a share repurchase plan of up to 110 billion US dollars, making it the largest repurchase in the history of US stocks and triggering the most popular daily increase in the stock in 18 months. Google's parent company Alphabet previously announced a repurchase plan of up to 70 billion US dollars, and Facebook's parent company Meta Platforms also announced a repurchase plan of up to 50 billion US dollars. Cloud software giant Saifushi increased its share repurchase program by about $10 billion, to a total of $30 billion.

Editor/Jeffy