#1: CEOs are bailing out
Click to Enlarge According to research from JPMorgan (JPM) “Flows & Liquidity” analyst Nikolaos Panigirtzoglou, non-financial corporates in the G4 economies have stopped soaking up their own equity in Q2 for the first time since the Lehman Bros. crisis. And based on an analysis of announced share buybacks and leveraged buyouts, the situation worsened further in Q3.
The problem is that free cash flow is drying up, as shown in the chart above.
Not only have purchases slows, but issuances are up with more IPO and secondary offering activity. You don’t have to be an economist to understand the message CEOs are sending as they offer more supply and bid less demand. They think equity prices are topping. At least, in terms of bond prices.