Downturn-Spooked JPM Axes Buybacks—So Will Others Follow?

Corporations have a hefty amount of cash, so perhaps share repurchases won’t be hurt too much.

Are U.S. companies’ enormously popular stock buybacks going to ebb? Maybe to some degree, but not a lot.

The question arises after JPMorgan Chase temporarily suspended its robust buyback program, as the bank’s earnings missed analysts’ estimates for the second quarter. CEO Jamie Dimon said in a statement that pausing the repurchases is prudent, as it will “allow us maximum flexibility.”

During the financial crisis, buybacks tumbled, from the then-high of $750 billion in 2007’s last quarter to $100 billion in 2009’s second period, research shows. They also plummeted in 2020’s third period, only to quickly resurge.

This time, maybe the worst buyback cutbacks will be confined to the financial sector. A Federal Reserve study showed that bank share repurchases in late 2008 and 2009, during the Great Recession’s worst days, dwindled to almost nothing. But that was a special circumstance propelled by federal regulators. JPM’s buybacks have been big, $22.6 billion last year and $2.4 billion in 2022’s first quarter.

Thus far in 2022, for corporations nationally, despite economic and geopolitical turmoil, share repurchases seem to be holding steady. They should reach an all-time high this year, according to projections from Condor Capital. The firm figured that the huge amount of cash on corporate balance sheets will keep the buyback engine chugging.

But any economic slowdown ahead could, as happened in the past, make company leaders more prudent. That’s the view of Matt Daly, Conning’s head of corporate and municipal teams. “I don’t expect companies to go out on a limb with repurchases,” he says.