As Ray Dalio just reminded us, the Trump administration is going to herald a golden age for titans of industry, deployers of capital, and any other “strong, can-do profit maker” who might once have given Ayn Rand the vapors. The market, more or less, seems to agree.
Which makes it somewhat curious that the one group conspicuously absent from the frenzied buying of the last several weeks is the one who'd be most poised to bask in the glory of increasing returns: CEOs.
Insider sentiment collapsed soon after the postelection rally began and insiders have continued to cash out even as Trump put together one of the most business-friendly Cabinets of all time, according to two measures of buying and selling by company executives. [...] The selling is even more intense in the banking, industrial and energy sectors, according to Ben Silverman, director of research at InsiderScore.
"It's certainly interesting that insiders in three sectors — financials, industrial goods and energy — that seem poised to benefit from the incoming administration's policies are leading the selling charge. Likewise, the type of tax code changes being talked about seem likely to benefit high-income individuals."
It's not the first time this pattern of insider selling has been noted since the Trump rally took off. Though it's not always possible to intuit a reason for corporate insiders dumping their stock – they may do so for tax reasons, to free up cash to buy that third beach villa, etc – this time around seems like a pretty robust trend. According to Vickers Weekly Insider, the ratio of sells to buys has been 5-to-1 of late, well above the 2.5-to-1 rate that qualifies a stock as bearish.
The Trump rally has been propelled by a strong narrative, in which infrastructure spending, deregulation and tax cuts combine to jolt economic growth out of its current rut. But that narrative has provoked plenty of skepticism, whether it's Jim Chanos dumping on Trump's infrastructure plans or bankers warning against a too-hasty retreat from Dodd-Frank.
It could be simpler than all that for CEOs, though. After all, profits aren't going to take themselves.