Buybacks 'Blackout' Could Invite Market Volatility
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What headlines and market stories set the stage for buyback volatility?
With your money briefing, I'm J.R. Whalen at The Wall Street Journal in New York. It's been smooth sailing in the markets the past few months, but that could be derailed by a buybacks blackout about to go into effect. We'll explain in a moment. First, these money and market stories you should know. The value of benefits, including bonuses and vacation time, grew at a faster rate in the past 12 months ended in June than wages and salaries. That extended a long-running but slow shift in compensation toward benefits and away from wages. The cost of benefits for private sector employers rose 3% in June from a year earlier, while the cost of wages and salaries advanced by 2.7%. The benefit gain was driven by a nearly 12% increase in bonuses and other forms of supplemental pay.
That likely in part reflects bonuses that many large companies gave to employees under the new tax cuts. Increased bonus payments could also indicate companies are using one-time payments to recruit or retain workers rather than raising their base salaries. The U.S. decision to impose tariffs on Chinese bicycles, handbags, and thousands of other consumer goods won't hit most items that'll be in stores this holiday season, but retailers are scrambling to speed some shipments through ports and bracing for higher costs next year. President Trump said Monday he'll impose new tariffs on about $200 billion in Chinese imports, including typical holiday purchases like Christmas lights and wrapping paper.
The 10% duty will take effect on September 24th and will rise to 25% at the end of the year. That timing means most holiday goods aren't likely to be subject to the big price increases because many big chains have already imported most of their winter items and the strong U.S. economy will allow retailers and their suppliers to absorb much of the initial costs.
What is the upcoming buybacks blackout and why could it matter for markets?
And a report from the New York Attorney General's office says that several cryptocurrency exchanges lack basic consumer protections, and are vulnerable to exploitation by market manipulators. The report concluded that many cryptocurrency platforms haven't taken serious steps to monitor and stop manipulative trading, and few monitor or restrict the use of trading bots. The report provides investors with a list of eight questions they should expect exchanges to be able to answer, including questions about controls for keeping abusive traders off the platform and details about security measures against hackers, details about insurance against theft, policies for preventing employees from trading on inside information, and details about transparency and independent audits.
The markets have been cruising along as of late with little volatility, and that's thanks to strong earnings reports and strong economic data. But Wall Street Journal markets reporter Amrith Ramkumar joins us with a look ahead at what could allow volatility to creep back into Wall Street. So Amrith, buybacks are responsible for a good portion of the upward movement we've seen in the markets, but it's a regularly scheduled blackout period that could upend things.
Right. And I think, like you said, the context is very important. We've entered a very quiet period in the calendar. You know, stocks haven't been moving that much. The S&P 500 hasn't moved more than 1% in multiple months. And there are still a lot of factors out there that could rattle investors as far as trade, higher interest rates. So the thinking is that it's not the blackout period alone where companies aren't really allowed to buy back stocks due to regulations in the month before earnings. It's kind of removing that supportive factor and then something else unexpected coming out of the woodwork that really could rattle investors in the coming months. So we'll have to see how it all plays out.
But it's interesting because it is one of these factors that analysts point to that has underpinned recent market gains. And this is supposed to be a historic year for buybacks. So heading into the last part of the year, it is definitely something worth watching.
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