1. Share Buybacks Will Return with a Vengeance Next Year

    Share Buybacks Will Return with a Vengeance Next Year

    S&P 500 companies will spend about $780 billion on share buybacks in 2017, marking a 30% rise from 2016, buoyed by corporate tax reform and the repatriation of cash from overseas, Goldman Sachs said Monday. Buybacks will account for the greatest share of cash use by S&P 500 companies for just the second time in 20 years, analysts wrote in a note...

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    1. We expect tax reform legislation under the Trump administration will encourage firms to repatriate $200 billion of overseas cash next year.
    2. Modest U.S. GDP growth of around 2% and ex-Energy earnings growth of 6% will sustain the popularity of buybacks and dividends.
    3. We believe the most likely policy outcome is the imposition of a mandatory tax on offshore earnings required to transition to a new system for taxing foreign source income.
    4. The ability to move cash around freely is a positive thing.
    5. If they have access to cash balances, they could be less inclined to raise debt in the future.
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