On July 31, 2026, US major indices all closed in the red, with the S&P 500 Index ending July with a record closing price. On the same day, a research report released by Goldman Sachs revealed an important driver behind this bull market—the crazy buyback behavior of US listed companies. The report shows that the total US stock buyback volume for 2026 is expected to reach $1.5 trillion, setting a new record. This figure not only demonstrates corporate profitability but also reinforces the status of US stocks as a global capital safe haven.
Buyback Wave Causes: Abundant Cash and Shareholder Return Culture
Over the past five years, the free cash flow of S&P 500 component companies has continued to climb, especially led by tech giants, with cash reserves on balance sheets already exceeding $1 trillion. Why do companies choose buybacks over reinvestment? Analysts point out that this is not only a deep-rooted manifestation of shareholder return culture in the US stock market but also an inevitable choice for management to optimize capital allocation in mature industries. When companies find it difficult to find high-return investment opportunities in existing businesses, buybacks not only support earnings per share but also send a "value undervaluation" signal to the market.
Tax Cut Benefits and Policy Stability Catalysis
Stable policy expectations are an important catalyst for the buyback wave. Despite macroeconomic uncertainties, the business-friendly policy tone in the United States continues, making companies willing to release profits in the form of buybacks. In addition, every large-scale buyback wave in history has been accompanied by an upward shift in market valuations, and 2026 is no exception. The tech sector has been particularly aggressive, with giants such as Apple, Google, and Microsoft having repurchased more than $500 billion in the first half of the year, contributing considerable upward momentum to the index.
How Buybacks Drive S&P 500 to New Highs?
From an accounting perspective, buybacks directly reduce the number of shares outstanding, increasing earnings per share (EPS) when net profit remains unchanged. EPS is a core variable in valuation models, and its improvement naturally drives the stock price center upward. According to Goldman Sachs calculations, about one-quarter of the EPS growth of the S&P 500 Index in 2026 comes from the contribution of buybacks. In addition, buybacks also boost market sentiment psychologically—companies that dare to conduct large-scale buybacks are often seen as having healthy cash flow and confident management, and this signal effect is particularly precious in an era when capital pursues deterministic assets.
Subtle Interaction with Fed Policy
The Fed's rate cut expectations provide lower financing costs for buybacks. Although companies typically use their own cash for buybacks, the low-interest environment also makes issuing bonds for buybacks attractive. The Fed's July 2026 interest rate meeting maintained rates unchanged, but market expectations for at least two rate cuts by the end of 2026 continue to rise. Loose monetary conditions and strong corporate balance sheets resonate, further amplifying the supporting effect of buybacks on the market index.
Why Buybacks Are a Unique Gene of US Stocks Compared to Other Markets?
Among global major capital markets, the scale and institutionalization of US stock buybacks lead. Buybacks are not only a financial operation but also an important part of shareholder culture. Unlike some European and Asian markets that prefer cash dividends, the US stock market's bull market over the past 20 years has already verified the efficiency of buybacks in driving long-term stock price increases. Investors often say "Buyback is the star of the bull market," which reflects the mature institutional environment, strict information disclosure, and deep penetration of shareholder activism in the US stock market.
Global Funds Adding Positions via ETFs and Index Products
Relying on the buyback behavior of large index component stocks, passive investment also benefits. In Q2 2026, global funds net inflows into US stock ETFs exceeded $200 billion, with S&P 500 index funds accounting for half of this. More and more overseas investors realize that instead of selecting individual stocks, they can share the entire US stock market's buyback dividend through index funds. This trend in turn enhances the liquidity and stability of the US stock market, forming a positive cycle.
Risks and Challenges: Buybacks Are Not a Panacea
Of course, large-scale buybacks have also raised some questions. Some argue that excessive corporate buybacks may lead to increased debt ratios and face funding pressure during economic downturns. In July 2026, several smaller market cap companies have had their credit ratings downgraded due to excessive buybacks. From a valuation perspective, when the S&P 500's forward P/E ratio approaches the historical high of 23 times, the marginal utility of buybacks on stock prices is diminishing.
However, the foundation of the US stock buyback wave remains unshaken for now. Stable corporate profit cycles, cash flow improvements brought by AI innovation, and global capital preference for dollar assets all suggest that buybacks will continue to serve as the "anchor" for US stocks in the foreseeable future.
How Investors Can Utilize Buyback Signals?
For investors concerned with "why US stocks," the buyback list is an important stock selection clue. High buyback volumes are often accompanied by long-term stock price increases, but one should be wary of management's "pseudo-support" behavior of concentrating buybacks at high levels. It is recommended to combine buyback intensity with free cash flow and debt levels, and pay more attention to the continuity of company buybacks over multiple quarters—this often better reflects a company's intrinsic value than one-time large buybacks.
In summary, on July 31, 2026, behind the S&P 500's new high is not just optimistic reactions to several giants' earnings reports, but another collective victory of the entire US stock market's shareholder return mechanism. Under the triple effects of abundant liquidity, stable policy environment, and deep return culture, US stocks continue to provide scarce high-quality assets globally. And this buyback-driven upward model is the most vivid footnote to the question of "why US stocks."
