(Bloomberg) — Beleaguered stock bulls are getting an encouraging sign from the people who know the companies best.
Corporate insiders scooped up shares of their own companies at the fastest pace in 16 months as the S&P 500 ( ^GSPC ) sank in March, and they kept buying at an elevated clip as the rout accelerated this month in the wake of President Donald Trump’s global tariff rollout.
Some 180 corporate insiders purchased their own stock in the first two weeks of the month, data compiled by the Washington Service show. This has tipped the buy/sell ratio to 0.40, keeping it near the highest level since late 2023. While corporate executives often buy stock for reasons unrelated to market performance, the uptick in purchases suggests a confidence in their companies that’s reassuring to investors who’ve been battered by the weeks-long selloff.
“This is a positive sign,” said Matt Lloyd, chief investment strategist at Advisors Asset Management. “Investors are still mired in a negative feedback loop, given trade and economic uncertainty. So it’s pivotal for this trend to continue as the stock market attempts to get its sea legs.”
Growing optimism from corporate executives stands in contrast to the broader risk-off mood. Investor sentiment regarding economic prospects is the most negative in three decades. Global fund managers are gloomy, with 82% of respondents to a monthly Bank of America global survey expected the global economy to weaken. A record number of them intend to reduce exposure to US equities, according to the poll.
That’s as investors are dealing with inflation that risks becoming entrenched because of a global trade war and the possibility of a recession. It’s the reason some, like EP Wealth Advisors’ Adam Phillips, are reluctant to overstate the trend of insider share purchases.
“Like so many others, a lot of these companies are flying blind as they await clarity around trade policies,” Phillips, managing director of portfolio strategy at the firm, said.
Crystal Ball
Buying and selling among corporate executives has a track record of providing an early read on market direction. The insider buy-sell ratio jumped in August 2015 and late 2018, with the former preceding a market bottom and the latter coinciding with one. In March 2020, corporate insiders’ purchases correctly signaled the bottom of a bear-market rout.
The number of sellers historically exceeds that of buyers as executives often view their stock as a source of cash.
Earlier this year, corporate insiders timed the stock-market correction right before the S&P 500 Index peaked in mid-February. They dumping shares of their own companies in most of January at an unprecedented pace, before reversing the move in the final days of the month.
This time, cash levels have posted their largest two-month increase since the throes of the pandemic, according to BofA, which could bode well for stocks when sentiment turns around. The money they’re sitting on could be used to buy stocks, and Plurimi Wealth’s Patrick Armstrong argues that now is precisely the time to build that equities exposure.
“The fact that insiders are scooping up their shares, cash levels are climbing and sentiment is so extremely bearish is an early indicator that the market selloff is beginning to make stocks more attractive,” Armstrong, who is the firm’s chief investment officer, said.