The stock market will likely keep rising as CEOs continue authorizing stock repurchases.
The Federal Reserve will keep pumping liquidity and keep the longest bull market alive.
Business consulting firm PricewaterhouseCoopers (PWC) recently released its 23rd Annual Global CEO Survey. The poll asks chief executives around the world about their global economic outlook for the next 12 months. Last year, nearly 30% responded that global economic growth would decline in the next 12 months. A year later, these CEOs were right on the money.
The International Monetary Fund reported that the global economy grew 2.9% in 2019. That’s a significant decrease from 3.7% growth in 2018.
This year, more CEOs believe that the global economy will slow down in the next 12 months. Despite the pessimism, the U.S. stock market will likely extend its historic bull run.
CEO Pessimism on Global Growth Reaches Highest Level Since 2012
More than half of the 1,581 CEOs polled in over 80 countries believe that the global economy will decline in the next 12 months. According to Liz Ann Sonders, chief investment strategist at Charles Schwab, the proportion of chief executives predicting a growth decline has surged ten-fold since 2018.
Hundreds of CEOs around the world don’t believe that the global economy will fare better this year. | Source: Twitter
While PwC’s survey may sound alarming, the results won’t likely translate into U.S. stock market losses. The U.S. has a secret weapon that can keep the party going.
Stock Buybacks and Billions from the Fed to Keep the Longest Bull Market Alive
CEOs in the United States are likely not worried that the economy will tank soon. Why would they be?
These big wigs have access to billions of dollars courtesy of the Federal Reserve. They can simply borrow money from the Fed to pump share prices through stock buybacks. These CEOs also approve generous dividends to stockholders to keep them from dumping their shares.
Blockchain pioneer Nick Szabo shares the same sentiment. He believes that CEOs are incentivized to pump their company’s stock because they receive handsome compensation for share price growth.
Asset inflation work to the benefit of CEOs. | Source: Twitter
This is not just a baseless theory. VanEck strategist Gabor Gurbacs took to Twitter to illustrate that the money supply grew by over $8 trillion since the financial crisis but the rate of spending declined by 30%. The new money didn’t trickle down to the average Joe because it made its way to the stock market.
Stock Buyback Growth Coincide With U.S. Stock Market Surge
Pessimistic or not, chief executives will continue buying back company shares. Yardeni Research revealed that the S&P 500 began to show signs of recovery in 2009 just as buybacks and dividends started to rise. Interestingly, this is around the time that the Federal Reserve launched the first round of quantitative easing.
The stock market rises as buybacks surge. | Source: Twitter
The global economy might slow down this year. It might impact efforts to buyback shares as companies often use their free cash flow to repurchase stocks. Nevertheless, the music will likely keep on going as long as the Federal Reserve keep pumping billions into the repo market.
Disclaimer: The above should not be considered trading advice from CCN.com. The writer does not own any stocks in the S&P 500.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
