The Tell: A slowdown in stock buybacks may be a bad omen

A deceleration in the pace of U.S. corporate stock repurchases is a worrisome sign, according to analysts at Bank of America Merrill Lynch.

In a note to clients last week, strategists at Bank of America Merrill Lynch said the percentage of companies buying back shares peaked in 2015 at nearly 70%. Such peaks historically precede market tops, the analysts warned. Meanwhile, the amount spent on buybacks has been steadily declining, though S&P 500 SPX, +0.61% companies are still spending more than $100 billion every quarter.

Over the past four years, net buybacks, which essentially amounted to share reductions, boosted earnings per share of the S&P 500 companies by 1%-2%, according to Jill Carey Hill, equity and quantitative strategist at BAML.

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