⚡️Axios Markets: Stock buybacks boom

Plus: A new crypto crackdown blueprint | Monday, September 27, 2021

Open in app View in browser   Presented By Blackstone   Axios Markets By Aja Whitaker-Moore ·Sep 27, 2021 😀Hello, Monday. 💒You were extremely generous with movie recommendations for my kiddo — which leads me to a confession. I have never seen "The Princess Bride." I will change that. Thanks for hanging out with me for the past week. Kate Marino is back from vacation and will be back in your inbox starting tomorrow! Welcome her. Today's newsletter is 1,056 words, 4 minutes.     1 big thing: Buybacks boom as corporate cash piles grow Illustration: Megan Robinson/Axios   The Delta variant is keeping more companies cautious about how to invest the mountains of cash they have at their disposal, Axios' Hope King writes.  That hesitancy has led, in part, to corporate spending on stock buybacks outpacing capital expenditures this year.  Why it matters: Companies hoarded cash and raised prices over the past year — leaving them with a lot of money and decisions about what to do with it. Many who wanted to reinvest in their businesses by spending on new equipment, found limited inventory to buy due to supply chain delays. Buybacks, which were restricted last year, are viewed as a more flexible option. They are easier to pull back compared with other forms of capital investment, Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices, told the Wall Street Journal.  Driving the news: Dell, News Corp, McDonald's and Lockheed Martin all announced buyback plans last week. Catch up quick: Buybacks among S&P 500 companies reached $370.4 billion, up 29% in the first half of this year versus the same period in 2020, according to S&P Global Market Intelligence via the Journal. Capital expenditures reached $337.2 billion, up 4.8%.  Yes, but: Buybacks from the top 20 companies made up the majority (55.7%) of last quarter's buybacks — up from pre-pandemic historical averages (44.5%) but down from last year (87.2%), according to S&P Dow Jones Indices.  The big picture: Capital spending started to pick up in the second quarter of this year, eclipsing pre-pandemic levels, especially in areas of technology as the world moved to a remote work environment.  What they're saying: Even though the absolute number of dollars spent on buybacks is high, the yield — what's been repurchased compared to market caps — is low and still below pre-pandemic levels, Saira Malik, chief investment officer for Nuveen, tells Axios.  "Corporate buybacks are a sign of confidence in a company's own business model [as well as] a sign of confidence in the stock market and with valuations where they are," she added. The intrigue: Part of the hesitation to repurchase shares even more strongly is because of this market rally, according to Malik. "Some corporates are more concerned about the valuations of the stock price and want to make sure that if they're going to increase buybacks, they're doing it when they feel that their stock price is more attractive." What to watch: Buybacks may reach a peak by early 2022, says Malik. New taxes, proposed to help pay for President Biden's domestic spending plan, could play a role in decreasing buyback levels.     2. Catch up quick Civis Analytics, a Chicago startup that could play an important role in next fall's Democratic Party campaigns, has raised $30.7 million in new funding. The company was founded by Dan Wagner, who led analytics for President Obama's 2012 campaign. (Axios) Polestar is close to a deal to go public by merging with a SPAC, Gores Guggenheim, in a deal valuing the Swedish EV company at $21 billion. (WSJ)     3. Economists set 2021 sights lower NABE; Chart: Kavya Beheraj/Axios   Business economists have tempered their 2021 growth expectations, cutting nearly a point off their annual GDP forecast since earlier this year, according to the NABE outlook survey released today, Axios' Dan Primack writes. Why it matters: This reflects increased concerns over the pandemic's impact on the economy, particularly due to the spread of Delta and other variants. Panelists said that a faster vaccine rollout could improve their outlooks. By the numbers: NABE survey panelists project 5.7% real GDP growth for 2021, which is down from the 6.5% mark in May. Anything above 4.8% would still be the highest annual GDP increase since 1984. Panelists expect 2022 growth to be 4.2%, down from 4.4% in May. Labor market expectations remained unchanged from May, with two-thirds of panelists still expecting non-farm payrolls to return to pre-pandemic levels by the end of next year. Sorry, pols: Only a small percentage of panelists felt that federal action or inaction on a large spending bill would have a significant impact on short-term growth, but most expect sharp inflation growth in 2021 and moderate inflation growth in 2022.     A message from Blackstone Blackstone invests to help power the modern economy     Blackstone is investing in the future. That's why we use our resources to support: Entrepreneurs reshaping digital connection. Scientists advancing medical treatment. Businesses building a more prosperous, greener economy. Learn more.     4. China's bitcoin ban sounds alarm bells Illustration: Sarah Grillo/Axios   This is not the first time Chinese officials have cracked down on crypto, but a new directive issued Friday is the most thorough one to date, CoinDesk's Christie Harkin writes. What's happening: Since 2013, the People's Bank of China has taken pains to point out that bitcoin and other digital currencies were not illegal, per se. That distinction has changed. The new law is so comprehensive in outlawing bitcoin and other digital assets that it leaves no wiggle room — using cryptocurrencies in China is now forbidden. Why it matters: The ban puts the survival of crypto — which is designed to be used by those outside that existing financial system — in question in a state that wants to stamp it out. It also serves as a potential playbook for other central banks considering doing the same. Between the lines: The digital yuan looms large. Though not addressed in the directive, China is rolling out a central bank digital currency (CBDC) that watchdogs fear will be a tool of digital surveillance. Fighting capital flight, where Chinese nationals park assets outside the reach of government purview, is said to be the main goal. As for enforcing the new crackdown, Chinese regulators are serious about that too. A laundry list of agencies will coordinate in monitoring the situation. What to watch: Whether this time will be different. Bitcoin has beat similar directives from Chinese officials in the past, but this souped-up version could be different. Go deeper.   Share Axios and earn rewards If you like this newsletter, your friends may, too! Refer your friends and get free Axios swag when they sign up. Be a good friend and share   5. What we're watching 👀 This week's Institute for Supply Management's manufacturing index reading will update the scorecard on the economic health of the sector. Why it matters: U.S. manufacturers reported their 15th consecutive month of growth in August, despite slogging through increasing COVID cases this summer and a slew of supply chain disruptions as demand surges. By the numbers: According to FactSet, economists estimate the overall index for September will tick lower to 59.6%, from 59.9% in August; it was 59.5% in July. What they're saying: "Demand is losing momentum as real retail sales moderate, but production has lagged behind spending throughout the pandemic recovery and still has considerable ground to make up," Credit Suisse analysts wrote in a recent report. What to watch: The next ISM report is scheduled for release on Friday at 10am.     A message from Blackstone Blackstone's partnership helps leaders transform businesses     Blackstone is investing in the companies and leaders shaping a tech-enabled future.. The reason: Supporting visionary leaders as they grow their businesses can help advance the innovations transforming the world. Learn more about Blackstone's partnership.   Keep in touch! Send tips, or feedback to aja.moore@axios.com or write to me on Twitter @AjaWMoore. Like this email style and format? Learn more about Axios HQ. It'll help you deliver employee communications more effectively.   Axios thanks our partners for supporting our newsletters. 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