Corporate Insiders Rush to Buy Shares Amid Market Downturn

In a glimmer of hope for beleaguered bulls in the U.S. stock market, corporate insiders have been rapidly purchasing shares in their own companies. This trend, which has been accelerating since March, has continued despite the market downturn triggered by the announcement of global tariff policies by former U.S. President Donald Trump.

According to data from a Washington-based service company, approximately 180 insiders bought shares in their respective companies in the first two weeks of April alone. This surge in insider buying has pushed the insider buy-to-sell ratio to 0.40, nearing its highest level since the end of 2023. While insider buying does not always directly correlate with market performance, the recent flurry of activity suggests that these executives are confident in their companies' prospects, providing a much-needed morale boost for investors who have weathered weeks of selling.

“This is a positive signal,” said Matt Lloyd, chief investment strategist at Advisors Asset Management. “Investors are currently stuck in a negative feedback loop due to uncertainties surrounding trade and the economy. The sustainability of this buying trend will be crucial as the market attempts to stabilize.”

Despite the renewed optimism among corporate insiders, the overall market sentiment remains gloomy. A recent survey by a global investment bank found that 82% of fund managers expect the global economy to deteriorate, marking the most pessimistic outlook in three decades. Additionally, a record number of respondents plan to reduce their allocations to U.S. equities.

Investors are grappling with not only the high-interest-rate environment driven by the Federal Reserve's inflation-fighting measures but also the heightened risk of a global recession due to escalating trade tensions. Adam Phillips, portfolio strategy director at EP Wealth Advisors, cautioned that while insider buying is a positive sign, it should not be overestimated. “Many companies are still navigating in the dark, awaiting clarity on trade policies,” he said.

Historically, the buying and selling patterns of corporate insiders have proven to be prescient. For instance, in August 2015 and late 2018, a surge in insider buying preceded market bottoms. During the market crash in March 2020, triggered by the COVID-19 pandemic, insiders once again successfully timed their purchases to capitalize on the market's lows.

Typically, insiders sell more than they buy, using their shares as a source of liquidity. Therefore, when insiders collectively buy shares, it often signals that market prices are highly attractive. Early this year, a similar pattern emerged: the S&P 500 peaked in mid-February, while insiders had been aggressively selling their shares since January. By late January, they began repurchasing, indicating a shift in sentiment.

Currently, data from banks show that corporate cash levels have increased at the fastest pace since the early days of the pandemic, providing fuel for a potential market rebound. Patrick Armstrong, chief investment officer at Plurimi Wealth, noted that this market correction presents an opportune moment for investors to increase their holdings. “Insiders rushing to buy their own company's shares, rising cash levels, and extreme market pessimism—these factors together form an early indicator that market panic is making stocks attractive again,” he said.