Stock buybacks have hit record levels this year but they’re about to get hit by taxes. These 10 companies have been the biggest buyers of their own shares in 2022.

• The Democrats plan to introduce a 1% tax on stock buybacks as part of Joe Biden’s climate and tax bill.
• S&P 500 companies spent over $280 billion buying back their own shares in the most recent quarter.
• Stock buybacks tend to be bullish for investor sentiment because they show a company has faith in itself.

The Democrats are set to introduce a 1% tax on stock buybacks as part of President Joe Biden’s Inflation Reduction Act.

The tax – which has been supported in the past by high-profile Democrats including Senator Elizabeth Warren – is unlikely to be welcomed by investors.

A buyback is when a company repurchases its own shares in the marketplace. It returns money to investors by boosting the company’s stock price, while also boosting key performance metrics such as earnings per share.

Mega-cap companies including Apple and Facebook parent Meta Platforms have been major proponents of stock buybacks in recent years.

And the top 20 S&P 500 companies spent a record $118 billion buying back their own shares in the first quarter of 2022, up 70% from the same quarter in 2021, according to index data. Over the last five years, that number rises to a staggering $1.24 trillion.

Here are the 10 companies that have spent most on stock buybacks so far this year.

It’s been a tough year for investors, with global stock and bond markets erasing $46.1 trillion in market value since November 2021, according to Bank of America.

 

The massive drawdown has led to forced liquidations on Wall Street, the bank’s chief investment strategist Michael Hartnett said in a Friday note, highlighting the recent break below 2018 support in the NYSE Composite Index.

And investors shouldn’t expect the pain to stop until the Federal Reserve, in coordination with other central banks, pivots away from its currently hawkish monetary policy and towards a more dovish stance, according to the note.

“Markets stop panicking when central banks start panicking but BoJ/BoE panics not yet credible nor coordinated,” Hartnett said, referencing the fact that the Bank of England’s recent easing measures, combined with the UK government’s tax cut plans, runs counter to its goal of reducing elevated inflation. 

As to when such a panic by central banks might occur, Hartnett believes mid-November is a possibility, arguing that the S&P 500 could fall another 10% from current levels by then, which would “force policy panic” right when the G20 meets on November 16.

Such a policy shift from central banks would help spark a short-term relief rally, but the stock market likely won’t find its ultimate low until the first quarter of next year when recession and credit shocks lead to a peak in interest rates and the US dollar, Hartnett said. 

To take advantage of such a decline, Hartnett recommends investors “nibble” if the S&P 500 hits 3,600, “bite” if it falls to 3,300, and “gorge” if the index touches 3,000, which would represent a peak-to-trough decline of 37.5% from its January peak. 

Based on historical data, the S&P 500 has experienced 20 bear markets over its lifetime, with a average peak-to-trough decline of 37.3%, which would be right in line with 3,000 for the S&P 500. 

Traders work on the floor of the New York Stock Exchange shortly before the closing bell as the market takes a significant dip in New York, U.S., February 25, 2020. Lucas Jackson/Reuters© Lucas Jackson/Reuters