Faster economic growth can cover a multitude of sins. That hasn’t been lost on Europe. It’s not that Europe has solved its financial problems. It hasn’t. Through much of the decade, we’ve watched financial stress bounce through troubled economies in Europe. At least to varying degrees, those problems have occasionally affected U.S markets. Since the Brexit vote almost two years ago, Europe has been quiet.
Market sentiment can be fragile. There are times when there is unbridled enthusiasm. Then, we may get a change in a key metric, and it’s as if everyone who was on one side of the boat runs to the other side.
In a way, that’s what happened when investor sentiment shifted between January, when shares were hitting new highs, and early February, when investors turned the tables.
The current economic expansion is now the second longest on record, according to the National Bureau of Economic Research, the arbiter of recessions and economic recoveries.
The subpar economic cycle is one reason for the longevity of the current recovery. It has kept the Fed from aggressively raising interest rates and, for the most part, has prevented speculative excesses from roiling the economy.
One for the record books?
Binge buying is one way to characterize what’s happening. Feasting on one’s stock is another. Curious? Let me explain. S&P Dow Jones Indices Senior Index Analyst Howard Silverblatt tweeted on May 25 that companies that make up the S&P 500 Index bought an estimated $187.2 billion of their own stock in the first quarter of 2018 – a record.
Put another way, these are companies that are repurchasing their own shares and taking them off the market.