The stock market is going up, but top executives aren’t buying shares in their own companies.
Tech founders including Jeff Bezos and Mark Zuckerberg have sold billions of dollars in shares of their companies in recent months.
Meanwhile, JPMorgan Chase CEO Jamie Dimon dumped one million shares of the bank earlier this year, pocketing profits of $183 million.
The movements of company managers and board members, who should be well informed about their businesses, are seen by some as a signal about the future behavior of the stock market as a whole.
Experts warn that these executive sell-offs mean that company insiders are worried 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 University of Michigan’s Ross School of Business, told the outlet.
“The fact that they are below average suggests that future stock returns will also be below average.”
Of all U.S. companies with a transaction by an officer or director in July, only 15.7 percent reported a net purchase of company stock, according to InsiderSentiment.com.
This is the lowest level in the last 10 years.
U.S. company officials and directors bought $2.3 billion in shares in their companies this year through September, data from internal analysis firm The Washington Service showed.
This was also the lowest amount in the same period since 2014. During the same period last year, executives bought $3 billion of their own shares.
Bezos has dumped $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 have risen by double-digit percentages this year.
Meanwhile, the S&P 500 has had its best first nine months of the year since 1997.
Seyhun, an advisor at InsiderSentiment.com, told the Wall Street Journal that he believes corporate experts are worried about a recession, which tends to cause a major drop in stock prices.
Recent economic data looks positive, with inflation starting 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 boss Dimon said earlier this year that he is concerned that there are still a number of inflationary forces on the horizon.
He noted 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 the risks to the global economy and thought the bank’s shares were overpriced, The Wall Street Journal reported.
Veteran investor Warren Buffett’s buildup of cash reserves in recent months has also spooked 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 is concerned that there are still a number of inflationary forces on the horizon.
Some experts warn that the executive sell-off means corporate insiders are worried about a possible recession, despite the stock market’s highs.
Buffett’s Berkshire Hathaway cut its stakes in Apple and Bank of America, selling nearly $5.4 billion in bank shares in just a few months.
Berkshire has traditionally been bullish on financial companies, leading some analysts to see Buffett’s liquidation as a clear warning that tougher times may be ahead.
“Investors should take note,” David Harden, CEO and chief investment officer at Summit Global Investments, told The Wall Street Journal.
“I don’t think it’s saying that he’s trying to time the market and look for pullbacks, but I think he’s saying, ‘This is overvalued and I value cash more than this investment.'”
But not all investors believe that insider trading is a good indicator of the future health of the stock market.
Some say 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 Dimon’s stock sales, which were the first in 19 years, were for “financial diversification and tax planning purposes.”