The S&P 500 tracking ETF (SPY) is up roughly 25% year-to-date.  But below we have broken out SPY’s 2019 move by after hours versus regular trading hours.  The “after hours” strategy represents SPY’s move outside of regular trading hours — its change from the prior day’s close to the current day’s open.  Given that most major events that impact the stock market occur outside of regular trading hours from 9:30 AM ET to 4 PM ET (like earnings reports, economic indicator releases, and anything that occurs in Asia or Europe before the US opens for trading), SPY nearly always opens at a different price that it closed at the prior trading day.  When you see S&P 500 futures trading up significantly in pre-market trading, SPY’s opening price at 9:30 AM ET is going to be a lot higher than the price it closed at the prior day.  When equity futures are down in pre-market trading ahead of the opening bell, it means SPY will open lower that day.

Conversely, the “regular trading hours” strategy represents SPY’s move from its opening price at 9:30 AM ET to its closing price at 4 PM ET.  This strategy shows how well the stock market is performing on an intraday basis.  When you combine the “after hours” move with the “regular trading hours” move, you get SPY’s full-day change from its prior close to that day’s close.

Below we show how well an investor would have done this year by just owning SPY after hours versus just owning SPY during regular trading hours.  As shown, had you bought SPY at the close every day and sold it at the next day’s open, you would have a gain of 11.1%.  On the other hand, if you did the opposite and bought at the open every day and sold at the close, you’d be up 12.3%.

Interestingly, the “regular trading hours” strategy started the year extremely strong, making up essentially all of the market’s gains over the first three months of the year.  During that time period, the “after hours” strategy was essentially flat, which means SPY was opening flat and then seeing a lot of intraday buying.

During Q2 and Q3, there was a lot of back and forth with the “after hours” strategy.  During periods when the trade war was really hot, we saw a lot of lower opens, but that stopped once the trade rhetoric cooled down.  As shown, since the beginning of August, we’ve seen the “after hours” strategy go from up 0% YTD to up 11% YTD.  Over the same time period, we’ve seen the “regular trading hours” strategy trade lower, although it’s up a little over the last two months.  This has caused the two strategies to converge to near even on a year-to-date basis as we approach year-end.

if we run the strategy back to the start of 2018, the “after hours” strategy is still crushing the “regular trading hours” strategy.  As shown below, had you bought at the close every trading day and sold at the next open, you’d be up 25.6% since the start of 2018.  Had you instead just bought every open and sold at the close, you’d actually be down 7%.  This means that more than 100% of the S&P’s gain over this time period has come outside of regular trading hours.  Start a two-week free trial to Bespoke Institutional to access our research reports, interactive tools, and more.

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