Stock Buyback Addiction Rages Among Companies at War With Bear Market

Politicians hate them, the tax collector is coming for them, and credit-market Cassandras say now is not the time to be blowing through discretionary cash. And yet stock buybacks have never been more popular with the constituency that counts: the companies shelling out.

Ten months into 2022, American firms have announced repurchases totaling $1 trillion, up 8% from a year ago and on course for an annual record, according to data compiled by Birinyi Associates.

That the spending should be so prodigious is notable on several fronts, among them that it bucks a longstanding trend in which companies reined in repurchases when share prices were collapsing. It’s also a vote of confidence -- some would say recklessness -- in balance sheets that, while flush with $2 trillion in cash, face mounting stress with a recession at hand.

“While the stock market has traded meaningfully lower, companies remain on sound footing,” said Jeff Rubin, director of research at Birinyi Associates. “Actions speak louder than words. While CEOs say they are concerned about inflation, a possible recession, and rising interesting rates, they are not hoarding cash and instead see value in their shares.”

Spending money on stock has repeatedly drawn criticism from politicians and academics who say the cash would be better used on things that aim at boosting long-term growth, such as equipment upgrades or employee benefits.