S&P/ASX 200 Index (ASX: XJO) shares have come under selling pressure in 2022.
The combination of fast-rising inflation and interest rates along with major geopolitical turmoil has seen the benchmark index lose 5.8% year to date.
That followed on from a strong 2021, where ASX 200 shares gained 13%.
While it may be overly optimistic to hope for similar gains at this stage of the calendar year, could the market already have hit its low point?
Image source: Getty Images
Has the bottom come and gone for ASX 200 shares?
A bullish sign to support the thesis that markets may be at or near their lows is coming from some of the top bosses of companies in the United States.
According to data from Washington Service, some 1,100 CEOs and top executives have been actively buying their own companies' shares in May.
If the trend persists this week, May will be the first month since March 2020 where the top brass is buying more than they're selling. That month, as you'll likely recall, marked the bottom of the vicious early pandemic sell-off and the start of a new bull market.
And, as Bloomberg notes, corporate insiders were also buying more of their own shares in August 2015 – right before the markets bottomed – as well as in the latter months of 2018, which marked another market bottom.
So why are many investors hitting the sell button, both with ASX 200 shares and in US markets, even as company executives are buying?
Boots on the ground
According to Craig Callahan, CEO of Icon Advisers (quoted by Bloomberg):
It is a function of investors functioning at the '30,000 foot level' or 'macro' whereas insiders are functioning at the 'boots on the ground', company-fundamentals level. We believe the company-fundamentals view is usually correct.
"It's encouraging in the sense that they have enough confidence in their businesses to put more money in," John Carey, managing director at Amundi Asset Management, added.
"We'll see if the trend persists, if the insider buying continues, but generally it's a positive sign."
How low confidence could boost ASX 200 shares
For a final signal that ASX 200 shares may be at or near their bottom point, we turn to Jim Paulsen, chief investment strategist at The Leuthold Group (courtesy of The Australian Financial Review).
Citing historically low investor confidence, he believes the stock market sell-off is close to running its course.
"Conviction across both Main Street and Wall Street is currently lower than about 94 per cent of the time since 1960," he said.
Paulsen continued:
Historically, when confidence was this low, the bear was close to expiring, and the average year-ahead S&P 500 return was more than plus 20%. Compared to historical norms, based on today's extremely negative sentiment, the stock market finds itself in an area where, traditionally, bears die … and … bulls come out to play."
While he's specifically singling out the S&P 500 Index (SP: .INX), when US markets run higher, ASX 200 shares generally follow.
