I’m going to go out on a limb and make a bull case for the equity market, but it’s not what you think as my overall defensive strategy hasn’t changed at all.
S&P 500 companies have donated $1.25 trillion in buybacks and dividends — almost equivalent to the total value of all gold ever mined Now let’s get into the ‘fundamentals.’ If the ‘fundamentals’ were strong and the macro outlook sunny, then Apple would be putting more of its cash flow into organic investment in the company than diverting its resources towards share buybacks. But the stock rallied, as mentioned, and that is what is most important to today’s C-suite types. This is likely why the stock market loved the GDP data that came out last week. The big news wasn’t the nonrecurring factors that produced that 3.
This really says a whole lot about how bizarre this cycle has been. CEOs see a very murky economic outlook, evidenced by the survey data on capital spending intentions and by their actual decisions, which have been to curb aggregate expenditure growth. The reason seems obvious — executives can borrow money very cheaply and believe that buying back their stock will be more accretive to their earnings than engaging in real capex.