The stock market has a $1 trillion secret weapon to fight further declines

• Stock buybacks could counteract extended market declines, according to Citi.
• The bank predicts $1 trillion in stock buybacks by 2025, up from 2024.
• Companies may shift spending from capital expenditures to buybacks amid Trump policy uncertainty.

The stock market has a $1 trillion weapon to fight further price declines: stock buybacks.

Analysts at Citi said in a Monday note that as the stock market continues to decline, it could present a too-good-to-ignore deal for companies to buy back their stocks at discounted levels.

"Should large cap US equities continue to correct, we expect that share repurchase activity would increase, thus providing some level of support to stock prices," Scott Chronert, US equity strategist at Citi, said.

Share repurchases have historically been an ace in the hole for companies looking to generate stock gains during lean times, since reducing the number of units outstanding boosts the per-share price.

Chronert estimates that in 2025, there could be $1 trillion in cumulative stock buybacks, representing an 11% increase from the about $900 billion spent on stock buybacks in 2024.

Of note, according to Chronert, is that companies could begin to shift their spending away from capital expenditures and toward stock buybacks as the market moves lower, especially considering the uncertainty related to the Trump administration's tariffs and trade policies.

"While policy impacts may alter the trajectory from here, we continue to see enhanced financial flexibility for many companies with the S&P 500 as a counterbalance to current correction risk in the markets," Chronert said.

The current breakdown of S&P 500 companies' cash use is as follows: about 30% goes to stock buybacks, about 25% to dividends, and about 45% to capital expenditures.

Citi highlighted 5,500 on the S&P 500 as a compelling level of value for companies to ramp up their stock buybacks. That level represents a further 3% decline from current levels.

With the bank expecting the index to rise to 6,500 by the end of the year, that's a potential upside of 18% from the 5,500 level if reached.

The S&P 500 traded at 5,691 Monday morning.

As to which S&P 500 companies are the largest buyers of their own stock, Citi highlighted Apple, Alphabet, Nvidia, Wells Fargo, and Visa on an absolute basis, which combined repurchased about $190 billion worth of shares last year.