Kevin O’Leary Spills the Secrets Behind the Stock Sell-Off – Is Your Money Next?

As U.S. stocks hit record highs, many investors are feeling uneasy, especially with some of the biggest names in business standing on the sidelines. Recently, it was revealed that Amazon’s Jeff Bezos and Meta’s Mark Zuckerberg sold billions of dollars worth of their company stock this year, even as the S&P 500 experienced one of its best nine-month stretches in history.

At the same time, legendary investor Warren Buffett trimmed Berkshire Hathaway’s massive stake in Apple and stockpiled an impressive $277 billion in cash reserves. It’s not just these prominent figures; corporate insiders across the U.S. are also hesitant to buy into the current market surge. According to InsiderSentiment.com, only 22% of company officers and directors bought shares of their firms in September, a figure below the 10-year average of 26%.

This cautious behavior has sparked concerns in financial circles, with some speculating that insiders might be preparing for a downturn. A professor from the University of Michigan’s Ross School of Business, Nejat Seyhun, told The Wall Street Journal, “Insider trading is a very strong predictor of aggregate future stock returns. The fact that they are below average suggests that the stock returns in the future will be below average as well.”

So, what’s going on here? Why are some of the smartest minds in the business world opting out of this rally? The simple answer is that even these business titans don’t know what the future holds.

For all their access to data and insights, Bezos, Zuckerberg, and Buffett are taking a more cautious approach, choosing to diversify rather than gamble on an unpredictable market. And that’s a lesson the average investor should take to heart—no one, no matter how connected or brilliant, can predict the future of the stock market with certainty.

It’s crucial to recognize that relying on insider trading patterns can be misleading. If someone claims they know how stocks will move, it’s best to be skeptical. Even top hedge fund managers struggle to outperform the S&P 500 consistently. Nearly nine out of ten fail to beat its annualized returns.

As we approach the end of 2024, I’ve personally been both selling and buying stocks, adjusting my portfolio as sectors like energy grow too dominant. For example, if energy stocks rise to more than 20% of my total holdings, I sell part of that position and reinvest the cash in other sectors such as health care, financials, or real estate. This way, I’m not overly exposed to any one area that might suffer a downturn.

Another factor investors should be mindful of is the upcoming U.S. presidential election. Between now and November 5, I won’t be making any major investment moves. The outcome of this election could significantly shape the future of the U.S. economy, and until we know who will be sitting in the Oval Office in January 2025, caution is warranted.

Vice President Kamala Harris has started to unveil some of her economic policies, which closely mirror those of President Biden. It appears Harris will continue the government’s practice of favoring certain industries through federal investments, much like the CHIPS and Science Act, signed into law in 2022, which channeled trillions into select sectors. Companies that align with these government priorities are the “winners,” while others may face higher corporate taxes and fall into the “losers” category.

Former President Donald Trump, on the other hand, has made it clear that he plans to lower corporate taxes and let companies compete freely, allowing the market to determine the winners and losers. This approach, in my view, leads to a more efficient economy.

As an investor, my strategy for the coming months will depend largely on the election results. In the meantime, my advice to those watching the current market rally is simple: stay the course. Continue contributing to a 401(k), which can offer consistent long-term returns of 8-10%. For those willing to take on a bit more risk, consider investing in a broad basket of stocks through ETFs like the Russell 2000, which tracks a large segment of the S&P 500.

Above all, remember the most important lesson from America’s financial giants: no one can predict the market. Diversify, stay informed, and make decisions based on what you can control, not on speculation.