This red line in this graph shows S&P index stock price. It tracks very well with the level of stock buybacks and dividends since 2001 when the dot.com bubble burst. During the bubble, investors were purchasing stocks in expectation of earnings growth. Since then, the market has been driven by corporate buybacks and dividends. Money that might have been invested by S&P firms is being used to reward shareholders. That has been good for shareholders. They gain from stock price appreciation and from dividend payments. Many firms are borrowing money at low interest rates to reward shareholders with buybacks and dividends. The interest is tax deductible. It would be better for the economy if corporations used their cash to expand operations.
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