CNN Business/Matt Egan
CEOs are selling stock. That could be a bad sign for the epic market rally
US stocks are on the cusp of a remarkable feat: setting new all-time highs during the middle of a pandemic. Yet there are signs that at least some leaders of Corporate America are skeptical about the sustainability of a mega rally that has catapulted the S&P 500 by 51% since the March 23 lows.
CEOs, leading shareholders and other senior executives are rushing to take chips off the table.
So-called insiders have dumped more than $50 billion worth of shares since the start of May, according to TrimTabs Investment Research. August is on track to be the third month of the past four where insider selling exceeded $15 billion, TrimTabs said. Insider selling is at a pace unseen since 2006.
The pace of insider selling could be a warning sign for the booming market because insiders, by definition, are privy to more information about the true health of their companies than average investors. And if they were confident in the market rally, insiders would be unlikely to sell now. Yet many are heading for the exits just as markets make new milestones.
“If you’re an executive and you see a challenging economic environment, the market is giving you a gift with this sharp rebound,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “Insiders apparently are thinking this is a time to exercise options.”
Gold price fighting back, rallies 2% and touches $2,000 an ounce
After falling to the mat last week, the gold market has bounced back and is fighting tooth and nail to reclaim the $2,000 ounce level.
The precious metal market has seen a resurgence of momentum after suffering its biggest weekly loss since March. December gold futures last traded at $1,989.90 an ounce, up 2% on the day. The yellow metal briefly pushed to $2,000 before falling back down.
While the gold market has been in the spotlight, some analysts have noted that silver is the metal investors should keep an eye on. Silver outperformed gold Monday with prices rallying more than 5% during the session. September silver futures last traded at $27.55 an ounce.
Gold and silver saw consistently higher prices through the Monday session as a weaker U.S. dollar and disappointing global economic data came in during the weekend.
A Gold Correction Was Expected After Nine Straight Weeks of Gains
The price of gold had its first down week since early June, ending a spectacular nine-week rally, the likes of which we haven’t seen since 2006. The yellow metal briefly fell below $1,900 an ounce last Wednesday as stocks neared their all-time closing high and the 10-year Treasury yield jumped on record supply. Wednesday’s $38 billion auction of 10-year government bonds was the largest in U.S. history.
It’s important to keep in mind, though, that the metal’s long-term drivers remain intact. We have unprecedented monetary and fiscal stimulus, with more potentially on the way. There’s still trillions of dollars’ worth of global government debt trading with a negative yield.
Despite the correction, gold continues to trade in a golden cross. That’s when the average price for the past 50 trading days is above the average price for the past 200 trading days, and it’s typically seen as a bullish signal. The current golden cross has been in place for more than 18 months now.
Gold’s run ‘hasn’t quite finished yet,’ says Standard Chartered strategist
The gold rally still has some ways to go despite its recent stumble, says Standard Chartered Private Bank’s Manpreet Gill.
“We think gold’s run … hasn’t quite finished yet,” said Gill, head of fixed income, currencies and commodities investment strategy at the firm.
“It comes back to interest rates,” he told CNBC’s “Street Signs Asia” on Monday. “One of the best explanations of why gold has surged the way it has through this year have been bond yields.”
“Net of inflation or what we call real bond yields, those have been sort of on (a) one-way tear and that’s sort of lined up very nicely with move in gold,” the strategist said.
Gold prices have had a stellar run so far in 2020, soaring to levels beyond $2,000 in early August. That hit a pause last week as prices of the precious metal fell below $2,000, with spot gold trading at $1,942.1405 per ounce Monday afternoon Singapore time.
Gill said the recent pullback in gold prices was explained by an uptick in bond yields. U.S. Treasury yields spiked early last week, as positive developments on the coronavirus vaccine front boosted risk sentiment. The yield on the benchmark 10-year Treasury note was last at 0.691%. A rise in yields puts pressure on non-yielding assets such as gold given the opportunity cost of holding the latter.
“We have quite a bit of one-sided positioning in gold and I think, you know, that’s actually unwound quite quickly. A lot of our proprietary indicators are telling us exactly that,” he said.