{"id":27368,"date":"2019-10-07T05:39:58","date_gmt":"2019-10-07T12:39:58","guid":{"rendered":"https:\/\/goldco.com\/?p=27368"},"modified":"2022-12-28T11:44:09","modified_gmt":"2022-12-28T19:44:09","slug":"corporate-stock-buybacks-still-record-highs-will-bubble-burst","status":"publish","type":"post","link":"https:\/\/goldco.com\/corporate-stock-buybacks-still-record-highs-will-bubble-burst\/","title":{"rendered":"Corporate Stock Buybacks Still at Record Highs: When Will the Bubble Burst?"},"content":{"rendered":"

One of the most frustrating things for investors to see today is that, despite the fact that the US economy is rapidly heading towards recession, stock markets remain at unusually high valuations. While those investors who have already invested in gold<\/a> to protect their assets are happy about gold\u2019s performance, especially as stocks have plateaued in recent months, they\u2019re still puzzled to see stocks not dropping like everyone knows they\u2019re going to. Why is that?<\/p>\n

As with much of the stock market\u2019s performance over the past several years, its continued high levels are due to one thing: corporate stock buybacks. You would think with the economy headed towards recession and a sure stock market crash that companies would cease their stock buybacks, but that\u2019s not the case. In fact, corporate stock buybacks may reach record levels this year<\/a> if they keep up this pace through the rest of the year.<\/p>\n

Corporations are getting the money for these buybacks from the debt they\u2019re issuing. Thanks to the Federal Reserve\u2019s recent interest rate cuts, corporate debt interest rates are also declining, leading corporations to issue record amounts of debt recently. And that\u2019s keeping the stock buybacks going.<\/p>\n

Why are investors continuing to buy corporate debt? For one thing, it\u2019s because stock markets have plateaued and investors are looking for any yield they can get. So in other words the plateauing stock markets are leading investors to buy corporate debt, the money from that debt issuance is used to buy back stock, which keeps stocks plateaued, which encourages more investors to buy corporate debt, etc. It\u2019s a vicious circular cycle that won\u2019t stop until stocks crash, corporations stop buying stock, or investors stop buying corporate debt.<\/p>\n

The question then becomes when any of those will happen. In all likelihood all of those will happen all at once. As we saw in the overnight repo market recently<\/a>, bond markets are at very high risk of freezing at very short notice. All it will take will be a little bit of nerves or anxiousness for investors to start shying away from corporate bond purchases. That then will defund corporate stock buybacks, which will lead to stocks falling from their currently high levels.<\/p>\n

Investors may hate the waiting game, but at this point it\u2019s just a matter of when, not if, stock markets will crash. If they\u2019ve taken the right steps to safeguard their retirement savings, investors who\u2019ve gotten out of stock markets and into gold are sitting pretty right now and should have nothing to worry about.<\/p>\n","protected":false},"excerpt":{"rendered":"

One of the most frustrating things for investors to see today is that, despite the fact that the US economy is rapidly heading towards recession, stock markets remain at unusually high valuations. While those investors who have already invested in gold to protect their assets are happy about gold\u2019s performance, especially as stocks have plateaued […]<\/p>\n","protected":false},"author":13,"featured_media":32537,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[208],"tags":[],"class_list":["post-27368","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-federal-reserve"],"acf":[],"yoast_head":"\nCorporate Stock Buybacks Still at Record Highs – Goldco<\/title>\n<meta name=\"description\" content=\"Corporations are getting the money for stock buybacks from the debt they are issuing. 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