What this chart shows
The graph above illustrates quarterly trends in corporate activity within the S&P 500 since 2013, focusing specifically on share buybacks and capital expenditures. Since the Global Financial Crisis, S&P 500 companies have repurchased over $7 trillion worth of stock, generating consistent demand and significantly influencing equity markets. This sustained buyback activity has not only supported share prices but also enhanced returns on capital, driven as much by balance sheet management as by operational performance, through the mathematical impact on earnings per share.
Why this is important
The technology sector, historically a strong proponent of buybacks, is now facing a shift in capital allocation priorities driven by the demands of AI. Hyper-scalers such as Amazon, Google, Meta, Microsoft, and Oracle have seen capital expenditures rise sharply, with capex as a share of operating cash flow increasing from around 15% to nearly 60%. This surge reflects the sector’s growing appetite for infrastructure investment, particularly in AI and data centers.
Free cash flow, often viewed as the cleanest measure of a company’s cash-generating ability, excludes capital spending. As such, declining free cash flow may signal that aggressive investment is beginning to erode future financial flexibility, raising questions about the sustainability and prudence of current spending strategies. If tech giants continue to draw down reserves to fund AI expansion, it could challenge the perception of quality and discipline that has long supported their valuations.
This shift may also lead to a slowdown or cessation of buybacks, removing a key mathematical tailwind for earnings growth and weakening one of the structural supports of equity market performance. The risk of over-investment is real: elevated capex may not yield proportional returns, potentially exposing investors to correction risk. In this environment, heightened vigilance, diversification, and disciplined portfolio management remain essential tools for navigating uncertainty.
Global markets rode a wave of cautious optimism as the Fed’s rate cut and easing US-China tensions buoyed sentiment, while Europe and the UK paused amid disinflation and weak growth; geopolitical risks from Gaza and oil markets kept volatility high.
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The Federal Reserve cut its policy rate by 25 bps (to a 3.75–4.00% range) on 29 October, its second cut of 2025, citing a weakening labour market and the complication of missing government data during the US shutdown.
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Equity markets hit fresh record highs early in the week as investors cheered a US-China trade framework and softer US inflation prints that raised odds of further Fed easing.
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Policy uncertainty and recession chatter persisted: commentary and consumer surveys flagged recession fears despite the rally - markets balancing optimism on trade vs. worries about growth and jobs.
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Political/geo-economic headlines (Trump administration trade moves and tariff decisions) continued to shape market sentiment and corporate guidance going into earnings season.
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Bank of England (BoE) policy discussion centred on whether to pause or begin easing - markets and analysts were split but many expected the BoE to hold at its November meeting while pricing a cut later, amid easing inflation but weaker growth signals.
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UK inflation remained well above target (sticky services and food components), keeping the BoE cautious even as voters and markets watch the upcoming autumn budget.
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Corporate/market headlines: a mix of corporate news (listings, M&A scrutiny such as Greencore-Bakkavor) and sectoral weakness in retail and SMEs fed volatility in domestic markets.
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Energy/industrial stress: UK oil-service insolvency (Petrofac administration) and ongoing questions around energy/renewables policy added to regional risk.
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The ECB held rates on 30 October and signalled a data-dependent approach as euro-area inflation eased toward ~2.1% (October preliminary), supporting the decision to pause.
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EU leaders continued to focus on defence/Ukraine support and on politically sensitive financing solutions (debate over frozen Russian assets and an asset-backed loan for Ukraine), exposing internal divisions even as commitments continue.
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Markets took the ECB pause as confirmation that disinflation is proceeding - bond yields and equity moves were modest as investors pushed any bigger easing bets into later months.
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Additional EU sanctions and export controls continued to shape trade-sensitive sectors (energy, defence, dual-use tech) and complicate corporate supply chains.
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US-China talks produced a modest trade framework (tariff rollbacks/market access steps reported) that helped trigger a global risk-on move and lifted Chinese equities initially.
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The Bank of Japan held policy steady (end-Oct decision), but Governor Ueda used unusually hawkish language — markets took that as a clear signal a rate hike (to 0.75%) could be imminent (Dec/Jan window).
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Even though a ceasefire that began on 10 October is nominally in place, Israeli air-strikes and artillery continue in Gaza. A meeting in Istanbul (with Turkey, Qatar, Saudi Arabia, UAE, Jordan, Pakistan, Indonesia) is expected to push for a Palestinian-led security/administration role in Gaza and renew pressure on Israel over the ceasefire terms.
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Middle East / commodity geopolitics remained a background risk (sanctions, supply-side moves and OPEC dynamics), so the oil market reaction to political events stayed a key watch item for inflation and EM finances.
