Are Market Returns Shaped by Real Value—or Games?

According to Goldman Sachs, U.S. corporates have been the largest net buyers of U.S. equity over the past decade—repurchasing more than $5 trillion since the financial crisis, including roughly $900 billion in the most recent year. That means more shares have been bought back by companies themselves than by pensions, individuals, or mutual funds. It raises an uncomfortable question: Are markets going up because businesses are thriving—or because the structure of the market is pushing them up?

This article explores whether today’s market returns reflect genuine economic value or are being shaped—sometimes invisibly—by structural forces like corporate buybacks, monetary intervention, and speculative trading dynamics.

Key Takeaways

• Stock buybacks have become a dominant driver of demand—raising questions about price formation and fairness.
• Central bank policies, including near-zero rates and quantitative easing, have changed how risk is priced across asset classes.
• Retail speculation and momentum trading can inflate short-term prices—disconnecting them from fundamentals.
• Structural forces don’t mean markets are rigged—but they can create distortions long-term investors need to understand.

Buybacks: Boosting Share Prices Without Adding Value

Corporate share repurchases were once occasional tools. Today, they’re central to earnings strategy. Many companies use cash not to invest in R&D or new hires—but to reduce share count, which boosts earnings per share (EPS) even if revenue doesn’t rise.

In 2022, S&P 500 companies repurchased $922.7 billion of their own shares—the highest annual total on record.

• Hypothetical: Imagine a company that earns $5 billion annually. Instead of reinvesting, it spends $4 billion buying back shares. Earnings per share rise because there are fewer shares—not because the business grew. Investors who focus only on EPS might mistake financial engineering for true growth.

So what? For investors evaluating price-to-earnings or EPS trends, it becomes harder to distinguish performance from accounting mechanics.

Central Banks and the Liquidity Illusion

Ultra-low rates and massive bond-buying programs—especially after 2008 and during COVID—have had sweeping effects on capital markets. Some investors worry that markets became dependent on central bank support, rather than economic resilience. Consider:

• The Federal Reserve’s balance sheet expanded from about $0.9 trillion in 2008 to nearly $9 trillion by early 2022, driven by successive rounds of quantitative easing and emergency lending programs.
• Asset prices across equities, housing, and bonds surged during QE periods.
• When rates rose in 2022, stocks and bonds both dropped sharply—uncovering correlation risks.

Many investors ask: Were these gains durable—or artificially supported by liquidity?

Speculation and the Rise of Short-Term Narratives

The meme-stock boom of 2021 showed how quickly retail traders can move prices. But this isn’t just about Reddit. Algorithmic trading, social media hype cycles, and zero-commission platforms all contribute to faster price swings. Short-term sentiment often overwhelms long-term fundamentals:

• A biotech firm may triple on trial news—only to collapse months later on regulatory setbacks.
• A tweet or viral video can add billions to a company’s market cap in hours.

That doesn’t mean retail traders are to blame. But it does underscore how much markets react to emotion, not just earnings.

• Hypothetical: A new retail platform sees its stock double after trending on social media. Traditional valuation models suggest it's overpriced—but flows keep pushing it higher. Long-term investors who buy late may face steep losses when sentiment cools.

How Should Long-Term Investors Respond?

Understanding structural forces doesn’t require rejecting the market—it just means adjusting expectations and frameworks. Some considerations:

• Use multiple valuation lenses. P/E ratios alone may miss buyback effects.
• Watch policy cycles. Markets often respond to interest rate shifts more than earnings.
• Diversify across drivers. Holding assets exposed to different forces—like commodities, real estate, or global stocks—can help balance distortion risk.

So what? Investors who ground strategy in long-term fundamentals while recognizing short-term distortions may be better positioned to stay disciplined.

Are These “Games” Here to Stay?

Skeptics argue that corporate buybacks, central bank liquidity, and speculative flows make the market feel detached from reality. But here’s the catch: investors who ignored these concerns and simply stayed invested were often rewarded.

In fact, over the past decade, major indices like the S&P 500 delivered strong returns—even as critics warned of bubbles, excessive stimulus, and financial engineering.

Part of this may be driven by media optimism. Financial outlets often amplify bullish narratives, quoting executives and analysts in a way that sounds like “investors can’t lose.” This can reinforce the momentum, whether or not fundamentals justify it.

Does that mean the market is broken? Not necessarily. But it highlights a paradox: the very forces that raise concern have also fueled performance. Ignoring them may be dangerous—but so might betting against them too soon.

Markets Still Reflect Reality—But Not Always Clearly

The stock market isn’t a conspiracy—but it’s not a pure meritocracy either. Structural dynamics like buybacks, central bank policy, and sentiment cycles can amplify or mask real value.

For long-term investors, the task isn’t to time these forces—but to be aware of them, build in resilience, and avoid mistaking noise for signal.