(Bloomberg) – The actions of American companies have reached a record this week, apparently ignoring concerns about customs, immigration and inflation. However, business leaders do something much less optimistic: they sell their actions at a quick pace.
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A measure of the feeling of the initiates who measures the number of buyers compared to the sellers shows that there were only 98 companies where at least one initiate bought the company’s shares this month until January 22 , against 447 in which at least one initiate sold, according to compiled data. by the Washington service. With just over a week of negotiation in January, this purchasing-sale ratio, at 0.22, has currently been on the way to being the lowest since 1988.
This volume of sales does not generally inspire investors, because it suggests that business leaders who direct companies lack conviction with regard to their own actions. However, such signals must be taken with caution, since many factors can lead to a sale, including the overall market performance, the value of the shares and the personal reasons of managers.
In addition to natural seasonality in the structure of initiate sales, they were concentrated this time in large technological companies that recorded enormous gains in 2023 and 2024, explains Mark Hackett, chief market strategist at Nationwide.
“After a formidable increase in actions for two years, especially in the area that knows most of the sales, it is natural to see a strong increase in sales,” said Hackett. “It is important to be attentive, as this could indicate a loss of confidence in the risk/yield profile of the group of action with high valuations; It is important not to react, as this could be part of the risk control and not reflect a lack of confidence.
This explains why another set of data makes it possible to draw up a more complete table of the feeling that companies have with regard to their own actions: business buyouts.
Birinyi Associates data show that buyouts for January have been at the highest level since at least 1999. Large American companies, including General Electric Co., Citigroup Inc. and Netflix Inc., have announced their intention to buy this actions month.
According to Jeff Rubin, research manager at Birinyi, American companies have announced buybacks of more than $ 48 billion until the closing of January 22, which prepares them to know the strongest January since 1999, the furthest than data goes.
In addition, a large part of American companies are currently in a prohibition period to buy their actions, given the season of publication of the results of the in progress. However, this generally does not change the company’s purchase-sale ratio of the company significantly, Washington Service said.
“There is often a great divergence between the activity of the initiates and that of the company, even if the same people make the decisions in both cases,” said Matt Maley, chief market strategist at Miller Tabak + Co. Business buybacks can also be downed up, given the theory. That a confident management would generally prefer to reinvest in the company and develop it rather than return money to investors, he said.
“However, when an initiate decides to sell shares, it is rarely a good sign,” he added.
The stock market is currently at a strange time. On the one hand, the stock market indices reach new heights with the optimism that inflation is on the right track and that the federal reserve will be able to continue to lower interest rates. However, large risks emerge due to possible tariff wars, massive expulsion efforts and an uncertain geopolitics, which all have the power to feed the price increase once again.
The valuations, in particular those of technological companies, are also high, which arouses many concerns about the vigor that remains in the current recovery.
But for the moment, investors choose to focus on positive aspects. On Thursday, the S&P 500 index closed to a record level, and after years of domination by the technology giants, more and more actions of the reference index have also started to increase. Market professionals expect this situation to improve this year.
However, the high number of initiates of the company selling actions can be worrying since they are used to providing early reading of market orientation over the years. The initiate purchasing ratio had jumped in August 2015 and at the end of 2018, the first preceding a hollow on the market and the second coinciding with another hollow. In March 2020, the purchase of business initiates rightly reported the low point of a rout of the lower market.
“The growth of redemptions could be rather a long -term trend,” said Steve Sosnick, chief strategist at Interactive Brokers, noting that as a share remuneration for employees becomes more popular, a large part Affairs are intended to compensate for this dilution. Backings are also a tool to maintain stock prices at a high level, he added.
However, “the sales of initiates seem to me to be the most down data point,” added Sosnick.
