Clued-in investors big and small are bidding up stocks, a fresh sign of confidence that November’s impressive equity rally has room to run.
In a month where $5 trillion has been added to share values, Goldman Sachs Group Inc.’s corporate clients showed a “big tick up” in repurchase activity. Same thing at the buyback desk at Bank of America Corp., which just had the busiest week of execution orders in the firm’s data history.
The people in charge of the businesses are in buying mode, too. Corporate executives and officers have snapped up shares of their own firms in November, with the ratio of buyers to sellers set to touch a six-month high, according to data compiled by the Washington Service.
The splurge comes as stocks recover from their worst retreat of the year, with a rally underpinned by growing expectations that the Federal Reserve will halt its rate-hike campaign as inflation cools. While skeptics point to the threat of a 2024 recession, corporate insiders have a strong track record in timing the market in recent years.
“We could see insiders buying into the bull case of inflation down, rate hikes over, mission accomplished. Insiders want to take more ownership of that message and they are willing to pony up real money to do so,” said Mike Bailey, director of research at FBB Capital Partners. “That is a double-barreled sign of optimism, with companies and individual executives buying back their stock.”
As of Monday, almost 900 corporate insiders have purchased their own stock in November, more than double the previous month. While the number of sellers also rose, the pace of increases was smaller. As a result, the buy-sell ratio jumped to 0.54, the highest level since May.
The buying impetus pales next to March 2020, when insider buyers outnumbered sellers by a ratio of 2-to-1 at the exact bottom of the pandemic crash. Still, the bullish stance is a departure from July, when stocks climbed and insiders rushed to dump stocks. That exit proved prescient as the S&P 500 sank 10% over the following three months.
Newfound vigor among business leaders echoes burgeoning bullishness elsewhere. From retail investors to big-money managers, bearish wagers are being unwound and fear of missing out is driving the S&P 500 toward one of its best Novembers in history. At Barclays Plc, strategists including Venu Krishna just raised their 2024 price target for the index by 300 points to 4,800.
The benchmark gauge was little changed at 4,551 as of 2:40 p.m. in New York after climbing more than 8% this month.
After refraining from buybacks earlier this year, American firms are now embracing them. Repurchases among BofA’s clients have stayed above seasonal levels for three weeks in a row, including one in which a record $4.8 billion was bought, according to data compiled by the firm’s strategists including Jill Carey Hall and Savita Subramanian.