The stock market is rising, but CEOs aren’t buying their companies’ stock.
Tech founders including Jeff Bezos and Mark Zuckerberg have sold billions of shares in their companies in recent months.
Meanwhile, JPMorgan Chase CEO Jamie Dimon sold a million shares of the bank earlier this year, pocketing a $183 million windfall.
The move by company executives and board members, who should be aware of their business, is seen by some as a signal for the future performance of the stock market as a whole.
According to the Wall Street Journal, experts warn that these executive sales mean that company insiders are worried about a possible recession.
Tech founders including Jeff Bezos (pictured) have sold billions of shares in their companies in recent months.
Insider trading is a very strong predictor of future total stock returns, Nejat Sihon, a professor at the Ross School of Business at the University of Michigan, told the publication.
The fact that they are below average indicates that future stock returns will also be below average.
According to InsiderSentiment.com, of all U.S. companies traded by an officer or director in July, only 15.7 percent reported a net purchase of the company’s stock.
This is the lowest level in the last 10 years.
U.S. corporate officers and directors bought $2.3 billion of their company’s stock this year through September, data from the Washington Service, an internal analytics firm, showed.
This was also the lowest value compared to the same period since 2014. During the same period last year, executives bought back $3 billion in stock.
Bezos unloaded $10.3 billion in Amazon stock, Zuckerberg sold $2.1 billion in Meta, while Dell Technologies CEO Michael Dell sold $5.6 billion, according to The Washington Service.
Meanwhile, the shares of all three companies have increased by double-digit percentages this year.
Meanwhile, the S&P 500 had its best first nine months of the year since 1997.
Sihon, who is a consultant at InsiderSentiment.com, told the Wall Street Journal that he believes corporate insiders are worried about a recession, which will lead to a sharp drop in stock prices.
Recent economic data looks positive, inflation is beginning to ease, and the best-selling jobs report earlier this month reassures investors that the labor market is on solid ground.
But some economists are more pessimistic about the hidden signs of pressure.
Dimon, the chairman of JPMorgan, said earlier this year that he was concerned that a host of inflationary forces were still on the horizon.
He noted that higher budget deficits and increased government spending will put pressure on an economy that is still reeling from higher interest rates.
He said in May that he was pessimistic about risks to the global economy and thought the bank’s stock was overpriced, according to the Wall Street Journal.
Longtime investor Warren Buffett’s increased cash holdings in recent months have alarmed some observers.
Zuckerberg has sold $2.1 billion in Meta shares, according to the Washington Service
JPMorgan Chase CEO Jamie Dimon said earlier this year that he was concerned there were still too many inflationary forces on the horizon.
Some experts warn that executive selling is a sign of corporate insiders’ concerns about a possible recession, despite the stock market’s decline.
Berkshire Hathaway Buffett reduced his stake in Apple and Bank of America, selling nearly $5.4 billion of the bank’s stock in just a few months.
Berkshire has traditionally been bullish on financial companies, leading some analysts to view Buffett’s sale as a clear warning that tougher times may lie ahead.
David Harden, executive director and chief investment officer of Summit Global Investments, told the Wall Street Journal: “Investors should take note.”
I don’t think you’d say he’s trying to time the market and look for a pullback, but I think he’s saying, “This is overvalued, and I’m getting more value for cash than I am for this investment. “
But not all investors believe that insider trading is a good indicator of the future health of the stock market.
Some say that shareholders may dump stocks to diversify their portfolios or free up extra cash, rather than as a result of a negative view of a particular stock.
In April, JPMorgan said the disposal of Dimon’s shares, the first in 19 years, was for “financial diversification and tax planning purposes.”
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