Buying Stocks: How US Corporations Buy Their Beautiful Stock Market

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Share buybacks at an exceptional levelThus, US companies are buying up their beautiful stock market world

Christoph Rottwilm

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Stock traders on Wall Street: Prices in the US are developing better than in Europe - also because the companies are helping with share buybacks.

As European stock prices fall, they continue to rise on Wall Street. One reason the US companies themselves deliver: their share buybacks in 2018 for the first time surpass a historic mark.

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Apple, Cisco and Co: The largest share buybacks in the US

The balance sheet of the past few months on the stock exchange is not pleasing: with the courses it went on turbulent and above all, on the bottom line, many investors should have incurred losses.

However, a close look reveals that the stock market in the United States outperformed many others worldwide. The comparison to the business in this country, for example, is clearly in favor of Wall Street. For example, while the German leading index Dax stock market chart lost more than one percent in the most recent trading week alone, the broad US index S & P 500 gained more than 2 percent over the same period. With a view to the past twelve months, the gap is even wider: the Dax lost almost 15 percent, while the S & P 500 lost nearly 10 percent.

Why is that? An important reason is undoubtedly the economic development of both countries. Germany has enjoyed a stable economic upturn for several years. However, its approaching end is now foreseeable. In addition, the German economy is in the context of the economically weaker euro zone, which is still struggling with the debt crisis. It is no coincidence that the European Central Bank is still keeping its interest rates at its lowest level, while in the US the cycle of incremental interest rate increases has been going on for quite some time.

Repurchases are likely to crack the $ 1 trillion mark for the first time

In any case, the US economy is developing significantly better than the local, which is not least due to the supremacy of US technology companies such as Apple stock market chart, Amazon stock market chart show, Google stock market chart show or Microsoft stock market chart show , It is they who have driven the US stock market bullet of recent years with their huge price increases.

All these are good reasons for the decoupling of the US stock exchange, especially from the European ones. But there is at least one more: Never before have US companies put so much money into repurchasing their own shares, as in 2018.

Background: If a company buys back its own shares, this increases the value of the securities in two ways. On the one hand, the number of shares in circulation, on which the company profits are distributed, decreases so that each individual share accounts for a larger share. And secondly, companies are acting as buyers in the stock market, increasing the overall demand for their paper.

Also worth reading : These are the largest share buybacks on the US stock exchange

In the United States, huge amounts of liquidity are available to numerous corporations after the tax reform that the Trump administration put into place at the beginning of the year. US President Donald Trump had promised that such funds should be used to create new jobs in the United States. However, a large part of the money, statistics show, companies are also in the repurchase of their own shares - which they also operate price maintenance and contribute to the good performance of the US stock market.

Remarkably: A large part of the repurchases is accounted for just those companies that are also otherwise in the center of US stock market activity, namely the leading tech companies such as Apple, Cisco stock market chart or show Qualcomm stock market chart.

Early in the year, it became apparent that this year could be a record year in terms of the size of US share repurchases. Meanwhile, this expectation solidifies. For example, according to figures from JP Morgan, the US economy is well on its way to pushing the volume of buybacks over the $ 1 trillion mark this year. It would be the first time in history that this value was exceeded.

Warren Buffett's turnaround is thoughtful

Even US investment icon Warren Buffett recently joined the buyers' phalanx, along with third-quarter results, Buffett's holding company announced it had bought $ 928 million of its own shares.

Investors should probably ponder the step of the well-known US investor. After all, Buffett often used to be skeptical about share buybacks. Such deals only make sense for companies if they could buy their papers at a low price, was one of his arguments.

Like many other US papers, however, the Berkshire stock market charts are currently at the highest levels they have ever achieved. So Warren Buffett has obviously deviated quite seriously from his conviction. The confidence of investors in the bull market on the US stock market should hardly increase this knowledge.

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