Ed Yardeni highlights that a surge in dividends and share buybacks is driving the current bull market:
Most importantly, during the current earnings season, US corporations continue to announce dividend increases and more share buybacks. Previously, I’ve shown that this corporate cash flow into the stock market–which totaled $2.1 trillion for the S&P 500 since stock prices bottomed during Q1-2009 through Q4-2012–has been driving the bull market since it began.
I have one concern: is this surge sustainable or was it precipitated by an increase in marginal tax rates for top income-earners and likely to slow along with earnings?
View chart at Dr. Ed's Blog: Dividends, Buybacks, & the Bull Market (excerpt).
The graph of S&P 500 Price vs. FED’s Announcement of QE seems compelling. The market started up upon announcement of QE1, QE2, Operation TWist and the current QE3 and continued for the duration of the initiative. Of course the buybacks and the announcements could be correlated since the buybacks could use debt ala Apple’s recent announcement… Interesting.