One of the great ironies of the 10 years following the financial crisis is the way in which low interest rate monetary policy-- which was, of course, designed to get real mainstream America back up and running, help people buy homes and start businesses-- has really bolstered share prices and the markets more than it has Main Street. Why is that? Well, if you look at the chart here, you can see that low interest rates have facilitated record amounts of corporate debt issuance.
A lot of that debt has gone into share buybacks. They've also peaked in the last couple of years after going up steadily since the financial crisis. Share buybacks, of course, always bolster the value of the S&P, which enriches the wealthiest 20% of Americans that own 80% of all the shares. So what's going to happen from here?
Well, we're seeing a little bit of a pullback this year on buybacks. It could be, however, that companies are simply waiting for tax repatriation, which is something the Trump Administration has talked about. If they are allowed to bring money back into the US, it's very likely that that cash will be going to more buybacks, which might then push up the market a little bit further before it eventually reconnects to Main Street.