- The debt just keeps piling higher…
- The real reason the stock market’s been so resilient…
- TRUMP’S CURSE: A $35 Trillion Meltdown Ahead? Robert Kiyosaki just issued his boldest warning yet — and he says the clock’s almost out of time.
Dear Reader,
The stock market has confronted trade-induced tumults this year.
The stock market has confronted Middle East conflict year.
The stock market has confronted political unsureness this year.
Yet the stock market has seen them all off. It hovers presently very near record heights.
Why has the stock market proven so rugged this year? Answer shortly.
First, I learn that United States household debt increased $185 billion this past quarter — a 1% increase over the previous quarter.
Mortgage balances increased $131 billion… credit card debt, $27 billion… automobile loans, $13 billion… and student loans, $7 billion.
Straws in the Wind
Reports PYMNTS, its voice cracking some:
- The share of seriously delinquent student debt jumped to 12.9% — up from just 0.8% a year ago.
- More than 2.2 million borrowers saw their credit scores fall by over 100 points, and 1 million lost at least 150. Bloomberg Economics estimates these credit shocks could pull $63 billion in consumer spending out of the economy on an annualized basis…
- Rising mortgage costs have pushed 70% of households earning more than $100,000 into living paycheck to paycheck — a sharp shift in financial stability among higher-income consumers.
Yet be not troubled. The stock market, after all, is up and away.
And so let us take up today’s question:
Why has the stock market proven so rugged this year?
Buybacks Are Back
The answer is buybacks — stock buybacks.
Through buybacks corporations purchase their own stock… which reduces the volume of shares outstanding… and raises the price per share.
Stock buybacks provided much of the helium that elevated stocks to such delirious heights since 2009.
Corporations suspended buybacks during the hell days of the pandemic. Yet buybacks are back — and with vengeance.
Reports Yahoo Finance:
- The practice — which reduces a company’s shares outstanding and helps boost earnings per share — hit a record-setting $165.63 billion in July, 88% higher than the previous peak in July 2007, according to new data from Birinyi Associates.
- Year-to-date buybacks now stand at $926.1 billion, $108 billion ahead of the previous year-to-date record set in 2022.
Hence the rugged, durable and resolute stock market.
A Major Tailwind for Stocks
Explains Mr. Mark Hackett, he of Nationwide:
- One factor that’s flown under the radar is the surge in corporate stock buybacks. While institutional investors pulled back during the market selloff, retail investors kept buying — and so did companies. In fact, firms stepped up their buyback activity at a near-record pace, even amid the broader market volatility.
- Notably, 2025 has delivered the strongest year-to-date pace for corporate stock buybacks in several years. April alone marked the third-highest monthly total for buybacks in over a decade.This trend… contributes to market liquidity and price support — factors that can help dampen volatility during periods of uncertainty.
In bullish conclusion:
- Some market analysts now predict that S&P 500 companies could surpass $1 trillion in share buybacks this year — a milestone that would mark the highest annual total on record. This level of activity is expected to provide a meaningful tailwind for U.S. equities.
Buybacks may benefit the stock market. But do they benefit the broader economy?
Financial Wizardry
Assume $1 trillion of corporate money channels into buybacks this year.
That is $1 trillion not devoted to improving corporate products and services.
That $1 trillion will not expand production. It will not heighten sales. It will not fund capital investment.
Thus buybacks to lift the short-term stock price may not represent the most prudent employment of capital.
They merely give a one-time jolt to corporate earnings on a per-share basis.
That is, they go in the service of financial wizardry. They represent not authentic profit — yet the mere illusion of profit.
They can nonetheless elevate the stock price.
Sign of a Market Top?
Should you then expect the stock market to bound higher and higher?
Not necessarily, argues Mr. Jim Reid of Deutsche Bank. Buybacks may instead indicate market peaks:
- Buybacks tend to occur more at market tops than bottoms, meaning companies often buy high, not low.
Would you care for additional evidence that the stock market may be nearing its summit?
Here Business Insider cites DataTrek Research co-founder, Mr. Nicholas Colas:
- Valuations look similar to levels seen during the internet boom in the 1990s, Colas said, with the S&P 500 achieving a series of record highs in recent weeks.
- The benchmark index now looks like it’s 8% more expensive than it was during the dot-com bubble, based on the forward price-to-earnings multiple among S&P 500 companies, DataTrek said. Given earnings estimates for 2026, the index looks on track to be 23% more expensive than it was during the dot-com bubble next year.
- There’s no way to explain those valuations without using a price-to-earnings ratio that implies “Peak confidence” or “Super Peak” confidence among investors, Colas said.
Ready to Get Whacked?
When the crowd attains “Peak confidence” I attain “Peak unconfidence.”
And when the crowd attains “Super Peak” confidence? I attain “Super Peak” unconfidence.
The S&P 500 is already 8% dearer than during the dot com deliriums.
By next year it may be 23% dearer than during the dot com deliriums.
That is, conditions are already “out of whack.” Conditions may drift even further out of whack.
And as newsletter man Bill Bonner is fond to say:
“Things that are out of whack have a way of getting back into whack.”
If the dot com example gives an indication… investors are in for a savage whacking.
The date when the re-whacking occurs, I do not know.
Yet I suspect strongly that it will occur.
Are you prepared — prepared to be whacked?
Brian Maher
for Freedom Financial News
