Insiders are buying against the trend during the sharp decline of US stocks in March! The "beginning of a bear market" theory has been debunked; the rebound window may have already opened.

Zhitong Finance APP learned that although the U.S. stock market fell sharply in March, corporate insiders instead increased their buying intensity.

Analyst Mark Hulbert, citing data from InsiderSentiment.com, pointed out that the proportion of companies with net insider buying rose to about 26% in March, up from about 20% in February. This indicator therefore climbed back above its roughly 24% 10-year average level, suggesting that although U.S. stocks plunged, executives and directors overall became “slightly more bullish.”

This point in time is especially worth watching. March was not a typical pullback. Against the backdrop of the Middle East war driving oil prices higher and broader macro uncertainty, global hedge funds saw one of the worst single-month drawdowns in years, while the stock market also experienced a significant sell-off— the S&P 500 fell more than 5% in March.

Therefore, the insider buying signal to some extent contradicts the view that March’s decline may only be the beginning of a deeper bear market. Instead, the information released from the board level appears more level-headed than the signals on the market’s price action—this divergence is worth investors’ attention, because they are evaluating whether the recent drop is presenting a buying opportunity.

It is also worth noting that recently, multiple market participants have expressed optimism about U.S. stocks, especially technology stocks that have been underperforming due to concerns over artificial intelligence (AI) and tight conditions in geopolitics. Senior strategist Ed Yardeni said that after U.S. technology stocks pulled back from last year’s historical highs, they have returned to levels that are attractive for investors willing to make long-term investments. Uncertainty about how AI will affect the software business, along with the impact of the Middle East war, led information technology stocks to fall 13% since they hit a historical high in October last year. But during this period, the industry’s earnings expectations accelerated upward, pushing its price-to-earnings (P/E) ratio to 20.6x, which is basically in line with the S&P 500’s P/E ratio of 19.6x. In a report he sent to clients last Sunday, Yardeni wrote: “For investors with a longer investment horizon, this is a very attractive entry point.”

Yardeni is not the only one who believes information technology stocks’ valuations have reached an enticing level. The investment research institute of U.S. Bancorp (Wells Fargo Bank?) has upgraded its rating for the sector from “Neutral” to “Overweight/Buy,” citing that the sector has underperformed the S&P 500 and that the broad adoption of AI supports its solid development outlook.

The global investment strategy team at Wells Fargo (U.S. Bancorp?) said that although valuation, capital expenditures, and the disruptive impact brought by AI are worrisome, the fundamentals of the information technology industry remain strong. They cited the double-digit earnings growth in the fourth quarter of last year as an example. The strategists also pointed out that since the outbreak of the Middle East war, the information technology industry has outperformed the S&P 500, highlighting the industry’s long-term growth and quality characteristics. The strategists said: “The gradual pullback in the past few months has brought valuations to a more attractive level. We think the pessimistic sentiment around the sector has gone a bit too far.”

In addition, U.S. stocks may be set for a partial rebound in the near term. Castle Securities noted on Tuesday that the firm’s data showed that retail investors—known for “buying the dip”—turned to net selling U.S. stocks and options on its platform last week, a rare phenomenon that has only appeared 18 times since January 2020. This shift occurred after a period of choppy trading in the stock market, driven mainly by surging oil prices and the escalation of the Middle East conflict.

Scott Ruebner, head of stock and derivatives strategy at Castle Securities, said that the firm has already observed signs of “early capitulation” by retail investors in both the spot and options markets, and that retail investors are no longer a one-way source of market buying. While this change implies that sentiment is turning more pessimistic in the short term, historical experience shows that similar phases often correspond to stronger subsequent market performance. The data show that in the two months after similar signals appeared in the past, the S&P 500 rose about 82% of the time, with an average gain of about 4.1%.

On the institutional investor side, defensive positioning is also increasing, but it started adjusting earlier. Ruebner noted that some systematic strategies’ current positions are still below the reasonable level implied by volatility; once the market stabilizes, they may bring new incremental buy orders. In addition, there are signs of long-term capital returning, especially in the large technology stock space, where some investors have begun to reposition through options strategies, indicating that “buying the dip” sentiment is recovering.

From a seasonal perspective, the U.S. stock market’s choppy performance may also be nearing the end of its cycle, and seasonal patterns could be providing support. The data show that April has traditionally been a strong month for U.S. stocks—since 1990, the S&P 500 has averaged a 1.5% gain in April, the second-highest after November (2.2%). Some market views attribute this seasonal strength to retail investors’ behavior—after the mid-month tax filing deadline, they often reallocate funds back into the stock market. As the influence of tax-related fund flows fades, the market’s focus will gradually shift toward second-quarter earnings reports and potential IPO activity, which could also provide fresh support for the stock market.