Stocks Are Strong, But the Warning Signs Are Growing
$S&P 500(.SPX)$ earnings remain solid, with 86% of companies beating Q2 estimates and revenue growth reaching its strongest level since 2022.
But record insider selling, stretched valuations and historically high institutional equity exposure are raising a different question: how much upside is left when the people with the most information are selling and the biggest pools of capital are already heavily invested?
Corporate insiders sold $77.6 billion worth of stock in the first half of 2026, the second-highest level of selling recorded in more than two decades. For every insider buying shares, eleven were selling. That is not noise. That is the people with the most information about future earnings, margins, and competitive positioning quietly reducing their own exposure at prices they apparently do not find attractive enough to hold.
The earnings picture is real but nuanced. Eighty-six percent of S&P 500 companies beat Q2 estimates, above both the five-year and ten-year averages, and those estimates had already been revised upward heading into reporting season, which makes the beat rate more meaningful than usual. Revenue growth came in near 13%, the strongest since 2022.
The caveat is that stripping out one-time valuation gains at two companies ( $Alphabet(GOOG)$ $Amazon.com(AMZN)$) drops the headline blended EPS growth rate from 47% to 29%. Still strong, but worth understanding what is actually driving the aggregate.
Valuation is where the conversation gets harder. The Shiller CAPE ratio, which smooths earnings over ten years to remove the distortions of any single cycle, currently sits at approximately 40.5.
In roughly 150 years of market history, that level has only been exceeded once: in late 1999 at the peak of the dot-com bubble, when it reached 44. The difference today is that the leading companies generating these multiples actually have earnings, free cash flow, and proven business models.
The dot-com era was largely built on projections. This one is built on real revenue. That distinction matters, but it does not make 40 times cyclically adjusted earnings cheap.
Institutional positioning: Equity allocations among institutional investors reached their highest level since October 2007 earlier this year, while bond allocations fell to their lowest since 2008.
The structural over-allocation to equities versus fixed income hit a 15-year extreme. When the largest pools of capital are already maximally committed, the marginal buyer becomes harder to find.
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