The SP500 index rose to new all-time highs earlier last week as traders piled into stocks at a record pace. Simultaneously, the forward PE multiple printed 27.02, which surpassed the dot com peak of 27.00.
As the Federal Reserve (FED) is printing billions each month, along with the US government’s continuous fiscal stimulus, money is flowing into equities. The underlying fundamentals remain bleak as the US economy appears to be worsening.
Therefore, since company earnings are flat YoY, or even much lower and stocks keep rising, the PE multiple keeps on inflating.
However, the last three days of last week brought some hard-selling, and indices corrected sharply from their highs. Could this be the peak before we see another sharp decline? Maybe. But one thing was certainly interesting;
According to the data compiled for the Financial Times by Smart Insider, insider selling by 1,042 chief executives, chief financial officers, and company directors in August was the highest dollar amount since November 2015. The total number of executives disposing of their stock as valuations, in some cases, surged beyond dot com levels, was the highest since Aug 2018.
That tells us another story – executives and insiders used the latest massive rally to dump stocks, which tends to lead to further declines in equities.
Moreover, since the latest “bubble” was fueled by margin trading and massive call buying, a 10% correction might be deadly to many traders as margin calls will be upon them.
✔️For more market news articles like this visit Axiory Intelligence.
Peter Bukov | Market Analyst
Peter comes from a background in corporate finance which began in 2013 when he completed the Corporate Finance Program at the University of Economics in Bratislava. He’s been actively involved in the market sector since 2008 and got his hands-on experience in trading in 2011.
His experience in finance and trading continues not only as a market analyst at Axiory Intelligence but also through his studies to obtain a degree in Capital Markets. The study is in line with MIFID II regulations and is under the supervision of the European Regulator ESMA, which strongly emphasizes ethics and morale in investing and working with a client.
In addition, Peter was awarded the title of ASCI from the CISI Educational Institute of England where he is an associate member and the Bloomberg Aptitude Test results ranked him among the top 4% worldwide two years in a row.
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