Joel Leon
Updated 2 min read
(Bloomberg) — The US stock market is back on track and within spitting distance of February’s all-time highs. Yet corporate executives are dumping shares at the fastest clip since November.
A gauge of insider sentiment, which tracks the numbers of buyers versus sellers, shows that 200 insiders bought shares this month through June 11, while 778 sold shares, according to data compiled by the Washington Service. That puts the buy to sell ratio at around 0.26, the lowest since November when Trump’s reelection triggered a months-long rally.
The absence of demand from C-Suite executives — the people who arguably know their companies best — may show a lack of conviction that the risk-on momentum that’s pushed stocks up 21% in a little over two months has more room to go. The S&P 500 and Nasdaq 100 indexes are trading back near record highs after positive signals on trade and solid earnings drove a rebound from the upheaval President Donald Trump’s tariff announcement on April 2 caused.
“The message from executives is loud and clear: many believe their companies are overvalued, making now an opportune time to sell,” said Irene Tunkel, chief US equity strategist at BCA Research. “Many insiders recognize that risks to their companies’ market values are increasingly tilted to the downside.”
Still, the number of sellers historically exceeds that of buyers as executives often view their stock as a source of cash that they may need for reasons that have nothing to do with markets.
To Nationwide’s Mark Hackett, insider buying is a stronger indicator than insider selling as sales can by driven by estate planning, large purchases and options exercises, among other factors.
“At the margin, a falloff in buying is a clear indication of market uncertainty, but also reflects elevated valuation,” Hackett said.
The S&P 500 is trading at 22 times projected profits in the next 12 months, some 18% above its long-term average, data compiled by Bloomberg show.
And while the euphoria around a return to form now faces a test in Trump reviving threats over unilateral tariffs, the high volume of insider selling is something investors may have to keep an eye on.
“This is not necessarily a major warning flag for the market, but it does tell investors that people who really know their businesses well realize that they’re shares are getting expensive,” said Miller Tabak’s Matt Maley. “It’s something that should caution investors about being aggressive now that the stock market has become quite expensive again.”
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