On the other side of the argument is Goldman Sachs, whose strategists led by David Kostin say companies have become the biggest buyer of stocks. Since 2010, net buybacks averaged $420 billion annually, far exceeding the combined purchases from households, mutual funds, pension funds and foreign investors, Federal Reserve data compiled by Goldman showed.

Kostin’s team, however, is not concerned about the surge in share issuance. While 2019 has a shot at achieving a record year of initial public offerings, it’s no match for the buybacks companies will execute. Primary share sales will reach $80 billion for the whole year, compared with net buybacks of $600 billion, Goldman estimates showed.

“Corporate buybacks will remain the largest source of equity demand and should still be only modestly offset by equity supply from U.S. IPOs,” Kostin wrote in a note last month.

That doesn’t mean it’s without risk. The market has developed “an unhealthy dependence” on buybacks and the danger is when companies aren’t able to sustain the pace of repurchases, according to Vincent Deluard, a strategist with INTL FCStone Financial.

Earnings in the S&P 500 came very close to falling in the first quarter, and analysts expect growth to be virtually zero for this quarter and next. Any exogenous trauma would make it worse.

In 2000, an exodus of individual investors exacerbated the bursting of the internet bubble. In 2007, corporate buybacks were booming. But as the global financial crisis spread, write-offs ballooned, profits sank, and companies including banks quickly turned to share sales to shore up their balance sheet.

“Companies typically increase buybacks when cash flows are strong and liquidity abundant but cut them quickly in times of economic and financial stress,” said Deluard. “Buybacks could have the same pro-cyclical effect as retail investors did in prior bear markets.”

This article was provided by Bloomberg News.

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