The stock market is soaring, but top executives are not buying shares in their own companies.
Tech founders including Jeff Bezos and Mark Zuckerberg have sold billions of dollars of shares in their companies in recent months.
JPMorgan Chase CEO Jamie Dimon, meanwhile, shed one million shares in the bank earlier this year, pocketing proceeds of $183 million.
The moves of company executives and board members, who should be be well-informed about their businesses, are seen by some as a signal as to the future performance of the stock market as a whole.
Experts are warning that these executive sell-offs mean corporate insiders are concerned about a possible recession, The Wall Street Journal reported.
Tech founders including Jeff Bezos (pictured) have sold billions of dollars of shares in their companies in recent months
‘Insider trading is a very strong predictor of aggregate future stock returns, Nejat Seyhun, a professor at the Ross School of Business at the University of Michigan, told the outlet.
‘The fact that they are below average suggests that the stock returns in the future will be below average as well.’
Of all US companies with a transaction by an officer or director in July, only 15.7 percent reported net buying of company shares, according to InsiderSentiment.com.
This is the lowest level in the past 10 years.
Officers and directors of US companies bought $2.3 billion of their companies’ stock this year through September, data from insider analytics firm, The Washington Service, showed.
This too was the lowest amount over the same period since 2014. Over the same period last year, executives bought $3 billion in their own stock.
Bezos has unloaded $10.3 billion-worth of Amazon stock, Zuckerberg has sold $2.1 billion in Meta stock, while Michael Dell, CEO of Dell Technologies, has sold $5.6 billion, according to The Washington Service.
Meanwhile, shares of all three companies are up by double-digit percentages this year.
The S&P 500, meanwhile, has had its best first nine months of a year since 1997.
Seyhun, who is an advisor to InsiderSentiment.com, told the Wall Street Journal that he believes corporate insiders are worried about a recession, which tends to cause a major decline in stock prices.
Recent economic data has appeared positive, with inflation beginning to cool and a blockbuster jobs report earlier this month reassuring investors that the labor market is on solid ground.
But some economists are more pessimistic about hidden signs of strain.
JPMorgan chief Dimon said earlier this year that he worries that there are still a raft of inflationary forces on the horizon.
He pointed out that higher deficits and increased government spending will add pressure to an economy still reeling from the impact of sustained higher interest rates.
In May, he said he was cautiously pessimistic about risks to the global economy and thought the bank’s stock was priced high, The Wall Street Journal reported.
Longtime investor Warren Buffett’s build up of cash reserves in recent months has also spooked some observers.
Zuckerberg has sold $2.1 billion in Meta stock, according to The Washington Service
JPMorgan Chase CEO Jamie Dimon said earlier this year that he worries that there are still a raft of inflationary forces on the horizon
Some experts are warning that executive sell-offs mean corporate insiders are concerned about a possible recession, despite stock market highs
Buffett’s Berkshire Hathaway slashed its stake in Apple and Bank of America, selling nearly $5.4 billion in shares in the bank in just a few months.
Berkshire has traditionally been bullish on financial companies, leading some analysts to view Buffett’s sell-off as a clear warning that tougher times may lie ahead.
‘Investors should take notice,’ David Harden, chief executive and chief investment officer of Summit Global Investments, told The Wall Street Journal.
‘I don’t think you’d say he’s trying to time the market and look for pullbacks, but I am thinking he’s saying, “This is overvalued, and I value cash more than I value this investment.”‘
But not all investors believe that insider trading is a good indicator as to the future health of the stock market.
Some say stockholders may unload shares to diversify their portfolios or to free up extra cash, rather than as a result of a negative view of a particular stock.
In April, JPMorgan said Dimon’s stock disposals, which were his first in 19 years, were for ‘financial diversification and tax-planning purposes.’
