Corporate America Hoards Cash for Tariffs Over Buying Back Stock

(Bloomberg) --US companies last month announced the fewest stock buybacks, in dollar terms, since the Covid pandemic, an early sign of cash hoarding from worries about economic growth and the impact of a global trade war.

The value of announced buybacks in the US reached $39.1 billion in March, the lowest dollar value since October 2020 and the lowest for March since 2019, according to data compiled by Birinyi Associates. That's a worrisome sign for investors since buybacks offer a crucial pillar of support for the US stock market, which is already down significantly from February's all-time highs and is facing pressure from the Trump administration's tariffs, which will be announced Wednesday afternoon.

“No one knows what will happen with tariffs,” said Jeffrey Yale Rubin, president of Birinyi Associates. “So how are corporate executives supposed to plan for cash flows? It's a lot easier to slow buybacks than cut dividends until companies know more about the trade outlook.”

A weak pipeline of planned stock repurchase programs is evidence of waning confidence among corporate executives. And with the Federal Reserve signaling it plans to hold off on interest rate cuts until inflation cools further, a revival in corporate buybacks could be needed for equity markets to rebound.

Corporations, which had been stingy on share buybacks in recent years, resumed their purchases at a blistering pace in 2024, putting up the second-highest annual dollar value on record. The wave of buying was due to stronger than expected earnings and improving operating margins.

But President Donald Trump's tariffs could raise both inflation and unemployment, creating a big challenge for US companies, which had been counting on tax cuts and deregulation to spur growth. And with US trade partners threatening to retaliate and stoke a trade war, it's unclear what the outlook for share repurchases is for this year. Upcoming earnings reports from some of America's biggest companies, starting with JPMorgan Chase & Co. on April 11, are likely to provide the first clues.