U.S. Markets closed

There is one missing factor in 2019’s epic stock market rebound

Scott Gamm

The 13% gain so far this year in the S&P 500 ( ^GSPC ) is missing a key factor: equity inflows.

That’s the assessment from a report from Citi Research analysts.

Investors aren’t putting new money to work. In fact, they are taking money out of the stock market, still bruised from December’s slump, which was the worst December for stocks since 1931.

On Dec. 24, 2018, widely considered the recent low for the stock market, the S&P 500 was down 19.8% from its Sept. 20, 2018, closing high of 2,930. A bear market is a decline of 20% from an index’s or stock’s most recent high.

The stock market is up 20.5% since Dec. 24.

Buybacks drive the market

“Buybacks, not investor inflows, now drive the U.S. market,” Citi analysts said.

After all, corporate stock buybacks were at record highs in 2018, topping $800 billion. Citi analysts expect another strong year for buybacks in 2019 as money abroad is repatriated back to the United States.

If investors start to put fresh capital to work in the coming weeks, even due to fear of missing out on a future rally, that could provide an extra tailwind for this market.

“If outflows turn into inflows in the next few months, that could add extra momentum for the market. Global equities go up 80% of the months when there are inflows compared to a random monthly outcome of up 60%,” the analysts wrote. “The average monthly return is 1.8% when there are inflows compared to 0.3% random outcome.”

Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm .

Follow Yahoo Finance on Twitter , Facebook , Instagram , Flipboard , LinkedIn , and reddit .

More from Scott:

2019 may be the year of tariffs against European auto imports

Citi downgrades U.S. stocks

The world is on an 'irreversible path to an economic downturn': Nomura

The years of easy money in the stock market are coming to an end

These 2 forces could prompt companies to cut capital expenditures