Corporate insiders haven't been this bearish in more than 20 years. And when the people running companies start dumping their own stock, you'd better pay attention.
According to a new report from insider-tracking firm Washburn Research, the sell-to-buy ratio among C-suite executives and board members hit 23-to-1 last month. That's the highest level since the dot-com bust. For context: during the 2008 financial crisis, it peaked at 15-to-1.
Insiders sold $8.2 billion worth of shares in June alone. They bought just $356 million. The message is clear: those who know their companies best are betting against them.
Why Insiders Sell — And Why It Matters
Insiders sell for lots of reasons. Diversification. Tax planning. A new yacht. But when selling dwarfs buying across the entire market, it's not about individual portfolios. It's a signal.
Research from the University of Chicago shows that insider trading patterns predict market returns with 70% accuracy over the next six months. When insiders sell en masse, stocks tend to fall. When they buy, they tend to rise. Simple as that.
Right now, every sector is flashing red. Tech insiders are selling at a 30-to-1 ratio. Financials? 25-to-1. Even healthcare, traditionally a defensive sector, is seeing a 20-to-1 sell ratio.
"Insiders are sending a message," says David Washburn, founder of Washburn Research. "They're not just trimming. They're exiting. That's the kind of behavior you see before a correction."
The Valuation Problem
Why now? Start with valuations. The S&P 500 trades at 22 times forward earnings. That's expensive by any historical measure. But more importantly, it's expensive relative to the actual economic reality.
Corporate profits have been shrinking for three quarters running. The Fed is still hiking rates. And the consumer, the backbone of the economy, is running out of pandemic savings. Retail sales fell for the fourth straight month in June.
Insiders see the disconnect between stock prices and business conditions. They know their order books. They know their customers. And they know when the music is about to stop.
What History Tells Us
This isn't the first time insiders have flashed a warning. In early 2000, insider selling surged before the Nasdaq crashed 78%. In 2007, insiders sold heavily before the housing market collapsed. And in early 2020, insiders sold ahead of the COVID crash — though that one was impossible to predict.
Each time, the mainstream was bullish. Each time, insiders were right.
Of course, timing is everything. Insiders can be early. They were heavy sellers in 2015, and the market took two more years to peak. But they've never been wrong about a major turn.
Should You Sell Everything?
Probably not. But you should ask yourself: if the people who run America's largest companies are cashing out, why should you stay in?
Some strategists argue that insiders are selling because they're taking advantage of high stock prices, not because they see doom. "Insiders have been net sellers for years," says Goldman Sachs' David Kostin. "The ratio is extreme, but it doesn't mean the sky is falling."
Maybe. But the magnitude of this selling is different. The 23-to-1 ratio is double the 10-year average. And it's broad-based. Not just tech or growth stocks — everything.
Even Warren Buffett is sitting on a record $130 billion in cash. If the world's most famous value investor can't find anything to buy, what does that tell you?
The Bottom Line
Corporate insiders are voting with their feet. They're selling into a market that's still near all-time highs. They're betting that the good times are over.
Maybe they're wrong. Maybe the economy pulls off a soft landing. Maybe AI saves us all. But if you're going to bet against the people who know their own companies better than anyone, you better have a damn good reason.
I don't.
