Market Commentary: Something Ominous Lurks Beneath

Peak excitement is kicking in now. The market has risen in 15 of the last 17 weeks. Nvidia’s forecasts that beat the street by a couple of billion dollars led to a $250 billion surge in market capitalization. And retail traders are pouring into out-of-the-money call options in the hopes of making life-changing returns on popular stocks.

Yet beneath the surface, something ominous lurks. JP Morgan’s CEO Jamie Dimon just offloaded $150 million of JPM stock. Mark Zuckerberg just sold $428 million of Meta stock. And it gets worse. Jeff Bezos disposed of a whopping $8.5 billion of Amazon stock.

Any one of these stock sales could be explained away. Perhaps Zuckerberg needs to fund his infamous underground bunker. Or perhaps Bezos needs the capital to invest in Blue Origin in order to compete properly with SpaceX. Whatever the individual reasons, the collective selling is concerning and signals that risk is high.

We know that because the last time these billionaires and millionaires engaged in collective selling was near the 2021 stock market peak before the market corrected by 20%.

Key Points

• Billionaires Jeff Bezos and Mark Zuckerberg have sold massive amounts of Amazon and Meta stock in the last 30 days.
• The last time billionaires sold, en masse, was near the peak in the market of 2021 before it tumbled by 20%.
• The Oracle of Omaha says bet big when the time is right, but now does not appear to be that time.

What Now?

You can see precisely the timing of the sales in 2021. Back then Musk, Zuckerberg and Bezos all sold near the heights.

Clearly they won’t manage to time the top to the day but they have a keen knack of selling just in the right window after a large run up and before a large correction.

So will this time be different?

Credit: TrackInsiders

The odds are this time will not be different and the billionaires are once again quite accurate in their timing, if a little early.

The way to think about their sales is less from a timing standpoint and more from a reward to risk perspective. What is the upside now? What is the downside?

Over the long-term, it’s quite possible the upside is a lot higher than the downside. But short-term? That’s where it’s hard to argue with the CAPE above 34 that fortune favors those hedging and lightening up on risk.

How to Play The Market Now

The temptation to chase the market now is especially high. This is the moment when FOMO kicks in. You missed Nvidia or SMCI or some of the other stocks that have rallied to enormous heights and, surely, you deserve your share of the spoils?

Certainly opportunities still abound now. One notable stock that appears to be breaking out is Robinhood. Yes, it’s demonstrating tremendous relative strength.

If you are putting capital to work, though, err on the side of caution and lower risk. As Buffett says when the time is right to pounce, bet big. But equally the corollary is when it’s not the right time, perhaps betting smaller is best.