Last week in Money and Markets I told you about a fundamental force that has been lifting stock prices in recent years: buybacks. They were a big reason why the S&P 500 Index gained 32 percent last year, while earnings grew less than 5 percent.
In the 12-month period ending September 2013 (the latest data available), corporate America invested $445.3 billion repurchasing their own shares. The record is $589.1 billion in 2007.
But there’s something else propping up the stock market: the great rotation out of bonds and into stocks. A growing number of investors, both large and small, will be making this asset-allocation move in their portfolios, which collectively adds up to an enormous amount of buying power for the stock market.
The three-decade secular bull market in Treasury bonds had to end sometime, and 2013 marked the inflection point between bull and bear.
— Money and Markets