Hey, Big Spender
Source: Bloomberg, Unigestion, as of 3 November 2021.
After becoming flush with cash in the immediate aftermath of the coronavirus crisis, firms have started to put that capital to use. Indeed, among non-financial firms in the S&P 500 that have reported thus far, their cash balances have remained stable quarter-over-quarter and are down -3% year-over-year. One important use of cash has been capital expenditures, which are now in aggregate growing for the S&P 500 and Stoxx 600 and improving for the Energy/Oil & Gas sectors, which have seen some of the largest cuts in capex over the last few years, as our chart shows. A continuation of this trend would provide a key support to growth.
However, capex is not the only use of cash that is seeing significant growth. Buybacks for S&P 500 firms reporting thus far are up 13% quarter-over-quarter and 68% year-over-year (vs 7% and 20%, respectively, for capex). More than 80% of the share repurchases have been funded with cash, and over USD 730bn worth of buybacks have been announced this year, eclipsing the 2019 level of USD 702bn and approaching the massive USD 939bn seen in 2018.
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