With everyone from DoubleLine Capital’s Jeffrey Gundlach to inverted yield curve disciples now forecasting a recession, it must be time to join the crowd and sell stocks, right?
Actually, this is exactly the wrong thing to do right now.
So say the “forecasters” with the best view on the economy: corporate insiders.
In the 5%-7% decline in the S&P 500 SPX, +1.67% , Dow Jones Industrial Average DJIA, +1.63% and Nasdaq Composite COMP, +1.96% since I suggested it was time for caution on stocks, insiders have stepped up to buy a big way.
More importantly, to me, they’ve put a decided emphasis on economically sensitive names. I recently told subscribers of my stock letter Brush Up on Stocks to get more bullish on stocks because of robust insider buying in cyclical sectors like tech, banks, industrials, chemicals, airlines, autos, hotels, energy, mining, and brokerage and investment companies.
Insiders would definitely not be doing this if — like Gundlach — they saw a recession on the way. Instead, they’d be on a buyer’s strike, or at best they’d favor utilities or consumer non-discretionary companies. But that’s not what we see at all.
Some notable examples of high-profile, economically-sensitive names where insiders are buying in large amounts include: JPMorgan Chase JPM, +2.04%, where a director just put $2 million into the bank’s stock; Ford Motor F, +0.81%, where Chairman William Clay Ford bought $7.9 million worth of stock; Chevron CVX, +0.72%, where a director bought a half million dollars’ worth; Dow DOW, +3.15%, where a director put $1.3 million into the stock; Marriott Vacations Worldwide VAC, +2.44%, where CEO Stephen Weisz bought $335,000 of stock; and eBay EBAY, +3.01%, where a director bought nearly a quarter million worth.
If the economy were about to tank, these insiders would not be buying these