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The companies were the largest buyers of warehouses under the bull market, but now they sell

Companies have been the largest buyers of stock under the bull market. But they slow down, which can be a worrying indicator. Usually, the public is regarded as the "crowd" of the stock markets, or otherwise put "stupid money". Retail investors usually buy the most at the top and sell at least at the bottom. Retail investors have not participated so much in the market, making it harder to use that audience as an indicator of the feeling. But Ned Davis, senior investment strategist at Ned Davis Research, said there seems to be a new audience to look at: companies. "Strong public sales should be bullish but perhaps the audience this bike is business," Davis wrote in a note to customers Wednesday. "The non-financial corporation has stacked into shares with repurchases, mergers and acquisitions." Davis pointed out that new business offers have recently jumped to the highest level this year. This includes large introductory public offers such as Uber and Lyft, as well as secondary offers from companies such as Tesla. Based on that, "maybe even the company's crowds are starting to feel the shares are exaggerated," Davis said. Investors believe that this is a basic supply and demand quota. Demand for shares in the form of repurchases is reduced, while the supply of shares through stock market introductions and other issues is increasing. When the supply exceeds the demand for a product, the price drop and stocks fall no different, but they argue. However, the increase in repurchases shows…

Companies have been the largest buyers of stock under the bull market. But they slow down, which can be a worrying indicator.

Usually, the public is regarded as the “crowd” of the stock markets, or otherwise put “stupid money”. Retail investors usually buy the most at the top and sell at least at the bottom. Retail investors have not participated so much in the market, making it harder to use that audience as an indicator of the feeling. But Ned Davis, senior investment strategist at Ned Davis Research, said there seems to be a new audience to look at: companies.

“Strong public sales should be bullish but perhaps the audience this bike is business,” Davis wrote in a note to customers Wednesday. “The non-financial corporation has stacked into shares with repurchases, mergers and acquisitions.”

Davis pointed out that new business offers have recently jumped to the highest level this year. This includes large introductory public offers such as Uber and Lyft, as well as secondary offers from companies such as Tesla. Based on that, “maybe even the company’s crowds are starting to feel the shares are exaggerated,” Davis said.

Investors believe that this is a basic supply and demand quota. Demand for shares in the form of repurchases is reduced, while the supply of shares through stock market introductions and other issues is increasing. When the supply exceeds the demand for a product, the price drop and stocks fall no different, but they argue.

However, the increase in repurchases shows signs of weakness – an indication that companies are less optimistic about the future. According to Larry McDonald, editor of The Bear Traps Report, a sharp slowdown in investment means that companies will also buy fewer own shares. The latest quarterly investments for S & P 500 came to the lowest since the fourth quarter of 2017, which is the “shadowing” of a decline in share buybacks.

“We believe that the long-standing trade war (and the uncertainty it causes) has paralyzed finance directors and their opportunities to invest for the future,” he said.

McDonald pointed to corporate confidence, profit and export “everything rolling over sharply.” Acquisitions are often driven by corporate debt. To buy back own shares, companies borrow money as a financing strategy. According to McDonald, over 50% of debt issuance over the past decade has been used to buy back shares.

“We have begun to see cracks in debt issuance. This permeates the company’s repurchase capacity,” McDonald says.

Instead of high-yielding but risky corporate debts or junk bonds, investors fly into safer alternatives like US Treasuries. Trade war jitters sent the 10-year government bond rate, which is moving in the opposite direction of prices, to its lowest level since September 2017 on Wednesday. This led to concerns over the economic outlook and sent the stocks down as much as 400 points. Increasing trade tensions in China-US. The trade battle also weighed on the markets.

“I am convinced that capital markets will close meaningfully for a long time,” McDonald said.

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