Stock buybacks could serve as a countermeasure against prolonged market downturns, as indicated by Citi. The bank forecasts that stock buybacks will reach $1 trillion by 2025, marking an increase from projected figures in 2024.
Amid uncertainties surrounding Trump administration policies, companies may pivot their financial strategies from capital expenditures to stock buybacks. The stock market possesses a formidable tool—stock buybacks—to mitigate further price drops.
In a note released on Monday, Citi analysts noted that the ongoing decline in the stock market could make it an attractive opportunity for companies to buy back their shares at discounted prices. Scott Chronert, a US equity strategist at Citi, stated, “Should large cap US equities continue to correct, we expect that share repurchase activity would increase, thus providing some level of support to stock prices.”
Historically, share repurchases have been a strategic advantage for companies seeking to enhance stock value during challenging periods, as reducing the number of shares outstanding elevates the per-share price.
Chronert projected that cumulative stock buybacks could reach $1 trillion by 2025, reflecting an 11% boost from the approximately $900 billion allocated for buybacks in 2024. He emphasized that organizations could begin to redirect funds from capital expenditures toward stock buybacks if the market continues to decline, particularly in light of uncertainties stemming from the Trump administration’s tariffs and trade policies.
“While policy impacts may alter the trajectory from here, we continue to see enhanced financial flexibility for many companies with the S&P 500 as a counterbalance to current correction risk in the markets,” Chronert remarked.
Here’s a summary of the cash allocation among S&P 500 companies: roughly 30% is directed towards stock buybacks, around 25% to dividends, and about 45% to capital expenditures.
Citi identified the 5,500 mark on the S&P 500 as an attractive value point for companies to escalate their stock buyback initiatives, suggesting this level indicates an additional 3% decline from the current standing. The bank anticipates that the index could reach 6,500 by year-end, representing an 18% upside from the 5,500 level. On Monday morning, the S&P 500 traded at 5,691.
Regarding the largest repurchasers within the S&P 500, Citi identified notable companies such as Apple, Alphabet, Nvidia, Wells Fargo, and Visa, which collectively repurchased about $190 billion in shares last year.
