Weekend Market Brief — Sunday 9/9/18

Corporations have pledged to repurchase $1 trillion of their own stock back this year, which is creating an opportunity for corporate executives to sell their shares to an indiscriminate buyer. In August, corporate executives cashed out over $10 billion of their own stock, the largest amount since November 2016.

Year-to-date, corporations have purchased $850 billion of stock, leaving $150 billion for the last four months. The Federal Reserve’s monetary tightening has largely offset this, as the stock market has barely set new highs despite this huge amount of money flowing into stocks.

The Fed is expected to unwind $240 billion from its balance sheet by year-end, not factoring any increases in the Federal Funds rate. With the Fed set to increase their tightening to $50 billion per month starting next month, it is unlikely corporate share buybacks will be able to continue boosting the market.

It will be interesting to see if the stock market can continue rising over the next couple months or it will be countered by the Fed’s monetary tightening.

For the stock market Bulls, corporate share buybacks are expected to drop 30% next year to $700 billion as the Fed is minimally expected to unwind $600 billion next year.