Trump authorities traded before the tariff announcement. What we know now.
Trump administration officials sold their shares days before the major tariff announcements. Here’s what we know now about timing and growing ethics concerns:
American companies are buying back their stocks at a record pace, even when stock prices are at their highest ever.
This type of stock repurchase activity could continue to drive the stock market to new record highs, making it an opportunity to buy every dip along the way, some analysts said.
Researchers at Trading Platform Captital.com wrote “a good emotional indicator” in their notes. “They tell you the management is confident.”
Announcement of a 2025 buyback from Corporate America reached $1 trillion on August 20th. This reached its milestone at the fastest pace ever, according to data from financial research and financial management firm Birinyi Associates. At that rate, the company will buy back more than $1.1 trillion in its shares in 2025, Birinyi said.
Companies often buy back shares when they feel that the stock is undervalued. The backback could reflect management’s confidence in the company and its outlook, experts said.
“Buybacks can be boring footnotes, or they can be beacons,” said Nicholas Vardy, editor of Global Guru Financial Newsletter. “If you’re looking for the boldest moves on Wall Street in 2025, forget about the headlines for IPO (first public service) or M&A (mergers and acquisitions) – the actual story is buried in buyback data.”
Isn’t the economic outlook pessimistic and uncertain?
The economy slowed, weakened the labour market, forced the Federal Reserve last week, and tied benchmark short-term interest rates by a quarter as inflation rates rose amid ongoing tariff uncertainty.
Some economists suggest potential stags and weak economic growth combined with higher inflation.
How can stocks thrive as the economy slows?
“This is a classic case where the stock market is not an economy,” Turnquist said. The S&P 500 companies have surpassed expectations of double-digit revenue growth this year, and those growths are likely to continue into 2026, he said.
Consumers remained resilient, and businesses frontloaded stock before tariffs, Turnquist said. He also said that after Covid-19, companies have a more agile supply chain. The company’s profit margins remain in the 12% range above the five-year average and need to rise, he said.
Morgan Stanley’s chief investment officer Michael Wilson also supports the company with more expected rate cuts and tolerance for inflation above the Fed’s 2% target.
“The government’s intentions are necessary. (Allowing inflation to slightly outweigh the target) Next year, the Fed’s reduction rate, revenue and revenue growth could be much stronger than expected,” he wrote in the memo.
“This is a classic early cycle as the stock market focuses on future improvements in revenue revision/pricing power, and therefore the Fed usually focuses on weaknesses in labour market data,” Wilson said.
How does buybacks affect the stock market?
Stock buybacks reduce the number of good stocks. This will make the company’s finances look better and stock prices will rise.
The company earning $10 million a year has earned $100 per share with 100,000 outstanding shares. If we buy back 10,000 shares, the total outstanding shares will decrease to 90,000 and earnings per share will increase to $111.11 without actually increasing the profits.
After the Broad S&P 500 Index plunged more than 15% in April with President Donald Trump’s first tariff announcement, the S&P 500 recovered to record-breaking highs in part due to strong corporate repurchases, some analysts said.
“We are committed to providing a range of technical strategists at LPL Financial,” said Adam Turnquist, Chief Technical Strategist at LPL Financial. “Perhaps one of the less controversial catalysts, the company’s buybacks, probably further boosted the market’s quick recovery.”
Are all buybacks a good sign for the company?
Critics argue that buybacks artificially inflate stock prices and support executives who receive stock-based compensation.
Buybacks also divert money from investments in workers, growth and innovation, the Biden administration said when it introduced a 1% tax on most publicly traded companies in the US. The tax was expected to rise to 4%, with the aim of reducing deficits by paying fair shares for wealthy businesses and people, improving tax equity and closing loopholes.
Tips to know that stock repurchase is a good sign
Buybacks aren’t necessarily bullish, so investors should consider the signs, Vardy said. Here’s what you should see:
- Tracking Buyback yield: Find the value of a company’s stock repurchase as a percentage of 10% or more of a repurchase of a company
- Check out our insider activities: If a corporate insider is buying with the company, it’s bullish.
- Follow the cash: Debt fuel buyback could be a red flag.
- search Small echo: Look for a lesser-known company in the same business that mimics the repurchase of large, large companies.
Medora Lee is a money, market and personal finance reporter for USA Today. You can contact her at mjlee@usatoday.com and subscribe to our free daily money newsletter for personal finance tips and business news every Monday to Friday morning.
