- The PowerShares Buyback Achievers ETF (NASDAQ:PKW) is up 10.7% this year, lagging the S&P 500 by a full 660 basis points - the largest underperformance gap in a decade, writes Stephen Gandel. Prior to 2017, buyback favorites had outperformed in six of the past nine years.
- Alongside this year's softness is a decline in buybacks themselves - on pace to slide 21% to the weakest since 2012.
- What gives? Higher interest rates, for one. For years, Treasurers had funded repurchases with bond offerings at barely visible rates. While we're far from a bond rout, rates have crept higher this year.
- 2018 could prove different, though. The tax plan includes a break for companies repatriating overseas cash, and some think a nice chunk of that money will go towards repurchasing shares. Goldman for years has hasn't been a fan of the buyback craze (naturally preferring cash be spent to retain its investment banking services), but even it sees repurchases rising to nearly $600B next year vs. the current quarterly run rate of $500M.
- ETFs: PKW, SYLD, TTFS, SPYB
- Now read: Earnings Fuel The Bull Market In Stocks, But There Could Be Trouble On The Horizon
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