Target and Microsoft this week signalled renewed appetite for purchasing their own shares, suggesting that the pace of US share buybacks may accelerate after a second quarter lull.

After Microsoft on Tuesday announced it would recharge its nearly complete $40bn buyback programme with a new one of the same size, Target authorised a new $5bn scheme on Wednesday.

This comes after buybacks slowed 3 per cent to $127.5bn in the second quarter of 2016 from a year earlier, as companies took a breather from one of the key accelerants driving the US equity rally.

The figure marked a drop of more than 20 per cent from the quarter prior and pulled the overall payout to shareholders through dividends and buybacks marginally below its record pace.

Investors said they did not view the recent drop in buyback activity as a harbinger of a wider decline.

“I would think it’s a pause as there is nothing in the environment that has changed the dynamic,” said Jack Ablin, the chief investment officer of BMO Wealth.

“The incremental stimulus is coming from the European Central Bank and Bank of Japan. The fact the ECB is buying US corporate debt is more important than the Fed.”

However, some expect companies may remain on the sidelines ahead of US elections in November.

“With the election looming, this is likely a note of caution as companies assess what’s going to change,” said JJ Kinahan, chief market strategist at TD Ameritrade. “You can see this not just in buybacks, but investment too.”

Share buybacks have proved an essential source of support for the S&P 500 since 2013, particularly earlier this year as investors shunned equities — more than $120bn has been drained from mutual funds and ETFs invested in US stocks this year, according to EPFR.

Companies have stepped into that void, spending nearly $1.9tn buying back their stock since the start of 2013, including 13 consecutive quarters in which buybacks eclipsed $100bn.

That has often come at the expense of increased capital investment as executives seek to buoy earnings and support lofty valuations.

Mr Ablin noted that the growth of earnings per share for the S&P 500 was double the growth rate of net income. “That’s strictly attributable to the fewer number of shares outstanding.”

Companies have pointed to lacklustre economic activity for those decisions and embarked on a spree of mergers and takeovers in 2014 and 2015 in search of faster growth.

Earnings have slid for five consecutive quarters, with Wall Street analysts pencilling in a slight decline in the current third quarter.

Apple and General Electric ranked as the most prolific spenders on their shares in the three months to the end of June, buying back $10.9bn and $7.6bn of stock, respectively, FactSet data showed.

The number of companies within the benchmark S&P 500 buying back shares in the quarter slid 8 per cent to 350.

Multinationals have funded part of their buyback programmes with new debt as they take advantage of historically low borrowing costs. JPMorgan estimated in August that 39 per cent of buybacks were financed by debt this year, up from 22 per cent in 2015.

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