Buybacks could be the stock market savior this year

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Here's why stock buybacks help

In a year that looks increasingly dismal for stock market returns, companies may have to come to their own rescue.

Retail investors are bailing on stocks, pulling money from domestic equity funds every week in 2016. No wonder: The S&P 500 was down 8 percent year to date even before Monday's market plunge, a bad sign for a market that historically takes its full-year cue from how things transpire early on.

The good news is that companies appear willing to step into the void.

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Share buybacks and dividend issuance collectively have been a major tailwind for the post-financial crisis bull market, which will turn 7 years old in a month if it can manage to hang on through the current volatility. Low historical valuations combined with cheap money have pushed corporations to return trillions to investors.

With the blackout period over for buyback announcements, Wall Street is expecting big things.

Early indications are that 2016 buybacks are "on pace to be one of the fastest starts on record," David Kostin, chief U.S. equity strategist at Goldman Sachs, said in a note his team sent to clients this weekend.