MW Many CEOs back Trump's policies - but this stock market indicator says otherwise

By Mark Hulbert

Corporate insiders are more bearish than they've been in over a decade

Only one S&P 500 sector is currently seeing net insider buying.

Corporate insiders are more bearish than they've been in over a decade.

That's important information to counter the narrative that corporate insiders are doing a happy dance now that a more business-friendly administration is in power in the U.S. While some corporate chieftains may be dancing, a large majority are not.

That's the unmistakable conclusion to emerge from an analysis of the latest insider transactions by InsiderSentiment.com, a website maintained by Nejat and Jon Seyhun. The former is a finance professor at the University of Michigan and a leading expert on interpreting the behavior of company insiders.

Consider those publicly-traded corporations that so far this year have recorded any insider transactions from officers or directors. There's been net buying since the beginning of the year at just 12.1% of those companies, as shown in the chart below:

The chart also shows that net insider buying has been trending down for several months now, and yet the U.S. bull market has kept chugging along. But this time appears to be different, Seyhun said in an email. That's because this low net insider buying largely occurred as the market was reaching new all-time highs - and selling into strength is not necessarily bearish. It may instead represent the insiders opportunistically taking advantage of high prices to convert to cash some of the shares they were awarded as part of their compensation packages.

Not so right now, however, according to Seyhun. That's because the stock market currently is trading several percentage points below its all-time high of two months ago. Notes Seyhun: "I don't see the recent acceleration of insider selling corresponding to a recent rise in prices... So, I see this as a bearish move on the part of insiders."

Read: The rich and famous don't fear a stock market bubble. That's why you should.

Another reason this time may be different is how widespread the current selling is. Consumer Staples is the only S&P 500 SPX sector in which there is net insider buying currently, according to InsiderSentiment.com. "Insiders in the other 10 sectors are all negative. Insiders [also] are negative on both growth and value. Additionally, insiders are pessimistic on small-cap, mid- and large-cap firms."

It's also revealing that the one sector with net insider buying is Consumer Staples. That's because it is the sector that typically exhibits the best relative strength during economic downturns, since consumers in a recession will sooner forgo the discretionary purchases of other sectors' goods and services than Consumer Staples essentials.

The table below lists the handful of Consumer Staples stocks for which there was net insider buying recently, according to Seyhun. The largest of these are Casey's General Stores $(CASY)$ and Lamb Weston Holdings $(LW)$. Four others have market-caps under $150 million, so if you're tempted to follow the lead of these companies' insider buyers, be sure to use limit orders to control your risk.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

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-Mark Hulbert

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January 22, 2025 08:05 ET (13:05 GMT)

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