Corporate Buybacks: The $7 Trillion Engine Behind the Long-Term Bull Market

While artificial intelligence currently dominates the market narrative, a deeper look at corporate finance reveals that the Tax Cuts and Jobs Act (TCJA) of 2017 provided the actual foundation for the recent bull market. By permanently lowering the peak marginal corporate income tax rate from 35% to 21%, the legislation allowed U.S. companies to retain significantly more earnings. Although the policy was intended to spur hiring and innovation, the primary outcome was an unprecedented surge in share buybacks. Since the start of 2018, S&P 500 companies have invested approximately $7 trillion to repurchase their own shares. This trend remains active, with 3Q25 buybacks reaching $249 billion, representing a 9.9% increase compared to 3Q24. Major corporations have utilized this mechanism to aggressively manage their capital structures. Apple has spent $841 billion to retire more than 44% of its outstanding shares since 2013. Similarly, Berkshire Hathaway deployed $78 billion for share repurchases between July 2018 and June 2024. From a market perspective, these repurchases reduce the total number of shares outstanding, which mathematically amplifies earnings per share (EPS) even if net income remains flat. This mechanism has provided a consistent tailwind for the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite, making equities more fundamentally attractive to value-seeking investors regardless of the current technological cycle.