US: Expectation for record buyback in 2017 - Natixis

The research team at Natixis published its latest investment strategy report on the US stocks, predicting their outlook for 2017.

Key Quotes:

“Among president elect Trump and Congress supported tax reform which has been the core of Trump’s campaign, a combination of lower federal corporate tax rates and the prospect of repatriation of foreign profits has increased the revival of buybacks in 2017.”

“S&P 500 Buyback Index has so far gained nearly 8% since the election, stunning the market by rising above most of 2016 flat performance.

“S&P 500 Buy Back Index, which tracks 100 companies with highest buy back activities in the S&P 500 list, has risen from the lows of 2016 after the election and currently is traded at the record highs.”

“The main explanatory factor for such performance of buyback related index is the expectation by markets of (i) a lower federal corporate tax rates and (ii) the prospect of repatriation of foreign profits that could be used to buyback stocks.“

“The president elect has offered to lower the tax rate from 35% to 15% while the House of representatives (HR) wants to lower it to 20%.”