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Companies are the biggest stock buyers
Households in stocks
A record 58% of US households participate in the capital markets, mostly through equities, and they hold roughly 38% of the total market. Individual investing and retirement contributions sent about $753 billion of new money into the equity market in 2025.
Companies buy their own shares
Corporations bought even more. In the 12 months ending September 2025, they purchased their own shares at a pace 11% above the year before. Instead of reinvesting profits in real tools that improve productivity, that money bids up the price of stock that was already inflated, all in the name of shareholder return.
Prices above assets
US stock valuations have pulled far away from the value of the underlying assets. The total value of US corporate equity liabilities exceeds the assets those companies own, even excluding their debt, by 1.8 times. Part of that gap is real. Companies hold corporate culture, industry expertise, and brand power that rarely show up fully on a balance sheet, and a share is a claim on future profits, priced at a premium that anticipates their growth.
Why did stock buybacks become so popular?
For most of the twentieth century, companies hesitated to repurchase shares because regulators worried it could be seen as market manipulation. In 1982 the US Securities and Exchange Commission adopted Rule 10b-18, which gave companies a safe harbor if they followed set limits on timing and volume. Buybacks then grew steadily and by the late 1990s were a major way of returning cash to shareholders. A 1 percent federal excise tax on repurchases took effect in 2023.
What does Tobin's q measure?
Economist James Tobin introduced the idea in 1969: the ratio of a company's market value to the cost of replacing its assets. A ratio above 1 means investors value the business at more than its tangible assets would cost to rebuild. Intangibles such as brands, software, and know-how are one reason ratios can stay above 1. The Federal Reserve's Financial Accounts of the United States provide the data needed to calculate it for US corporations.
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