Buybacks ending which will not hold up markets anymore

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 Buybacks ending which will not hold up markets anymore

With interest rates rising and recessionary concerns looming, companies need to protect their dry powder. Two years ago, interest rates were Zero. In a few months, the Fed funds rates will hit 5%. But that’s not all…On January 1, a new law went into effect. The Inflation Reduction Act mandates that companies pay a 1% tax on all buybacks moving forward. In December, RBC Capital Markets warned that the “potential pillar of support” would disappear. Around the same time, Bensignor Investment Strategies sounded a similar warning… “Corporate buybacks – a major catalyst for the bull market since the Great Financial Crisis – will likely be dramatically reduced going forward because of a new 1% excise tax on them taking effect on Jan. 1, as well as corporations no longer being able to issue almost cost-free debt (like they had been able to for several years) to finance those buybacks”.

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