Artificially low interest rates encourage companies to use their cash to buy back their own shares to drive up their share prices, rather than to invest in their businesses. This explains why the economy is showing limited growth but the stock market is hitting record highs. According to CapitalIQ data, the single biggest buyer of stocks in the first quarter was not a mammoth hedge or pension fund, but the companies of the S&P 500 itself, which cumulatively repurchased a $160 billion of their own stock.
When companies make the determination that they get a better and more immediate return on investment in the form of higher share prices from buying back their own shares than hiring new employees or making capital investments in their business, workers are not hired and additional productive capacity is not built. Buying back shares often offers a company the greatest return on investment.