GOLDMAN: We're Blaming The Stock Market Sell-Off On A Pullback In Buybacks

Ever since the financial crisis, S&P 500 companies have spent around $2 trillion buying back shares of their own stock.

Some market experts have warned that a pullback in buybacks would cause stock prices to fall.

Goldman Sachs' David Kostin believes a temporary pullback may explain why the S&P 500 has tumble from its all-time high of 2,019 on September 19.

"Most companies are precluded from engaging in open-market stock repurchases during the five weeks before releasing earnings," Kostin notes. "For many firms, the beginning of the blackout period coincided with the S&P 500 peak on September 18. So the sell-off occurred during a time when the single largest source of equity demand was absent. Buybacks dip during earnings reporting months, which have seen 1.2 points higher realized volatility than in other months during the past 25 years."

The bulk of Q3 earnings announcements will be out by the end of October, at which point Kostin believes buying will pick up again.

"We expect companies will actively repurchase shares in November and December," he writes. "Since 2007, an average of 25% of annual buybacks has occurred during the last two months of the year."

Kostin believes the comeback in buybacks will drive the S&P to 2,050 by year-end.