Goldman Sachs says share buybacks will plunge 50% this year as coronavirus batters companies

• Goldman Sachs forecast that share buybacks will fall 50% to $371 billion in 2020 in a Tuesday report.
• It would be the lowest level of share repurchases in a decade.
• Share buybacks have been a popular tool for companies, as they tend to increase share prices by boosting earnings per share. But, they've been called out during the coronavirus pandemic, as companies asked for government help.
• Read more on Business Insider.

Share buybacks are set to tumble in 2020 as the coronavirus pandemic roils companies, according to Goldman Sachs.

The bank forecast that repurchases will fall 50% to $371 billion in 2020, the lowest level in a decade, according to a Tuesday report.

The coronavirus pandemic has cast share repurchases, a major support of the record-long bull market, into the spotlight. The CARES Act, signed into law by President Donald Trump at the end of March, has restrictions around how government funds can be used.

"We ensured in the bill that any taxpayer dollars given to industry goes first and foremost to worker paychecks and benefits, not CEO bonuses, stock buybacks or dividends," Speaker Nancy Pelosi said in a speech before the act was passed.

Read more: Famed economist David Rosenberg nailed the housing crash. Now he explains why this crisis won't end as quickly as it began, and shares an investing strategy for the next 3 years and beyond.

Share buybacks have been a popular tool for companies, as they tend to increase share prices by boosting earnings per share. Over the past decade, major airlines, including Delta, United, and Southwest, have used as much as 96% of their cash flow to repurchase their own stock, Bloomberg reported.

Share repurchases were already declining before the coronavirus hit. Buybacks soared to a record $1.1 trillion in 2018, then slowed slightly, and they are projected to hit $1 trillion in 2019. In October, Goldman Sachs forecast that buybacks would fall by 6% in 2019, the sharpest annual decline since 2009.

If buybacks continue to fall, they could match the level of repurchases seen amid the Great Recession. A peak-to-trough drop of 70% would match the drop in repurchases seen in 2008-2009, according to Goldman.

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