After a brief lull in 2023, buyback activity appears to be back this year. A resilient U.S. economy, easing inflation pressures, and expectations for an eventual shift to interest rate cuts have given corporate America confidence to boost authorized share repurchases. These companies have a history of outperforming the broader market and tend to have more exposure to momentum, value, and growth factors. While buybacks also reduce share count and help support earnings growth and valuations, they can also help limit downside volatility during periods of selling pressure.

As the Federal Reserve (Fed) continues with its Quantitative Tightening (QT) program, questions abound regarding the Treasury Department’s expanding funding needs. The QT program is designed to reduce the Fed’s balance sheet — now $7.7 billion down from $9 billion — after Treasury notes (mostly) were bought after economic concerns intensified during the COVID-19-related pandemic. Households and, perhaps surprisingly, foreign investors have been buyers recently, and with the amount of Treasury supply coming to market, both will need to keep buying.