How The S&P 500 Overnight Guessing Game Impacts Your Wealth

Your investment future is, in part, tied to the futures

Earlier this year, Bespoke Investment Group published a study that said something many investors will find either confusing, disappointing or both. All of the S&P 500’s gains since 1993 have not occurred during the main trading day.

Specifically, they said that buying the S&P 500 ETF (SPY) SPY -1.2% at the open and selling at close every day, (so you just hold it during the trading day) produced a -13.9% return (that’s a minus sign, and that’s cumulative over 27 years).

Buying SPY at close & selling at next open, whereby you only hold it after-hours produced a return of…wait for it… +634.2%!

The impact on stock market investors can be significant. You go to bed with your portfolio’s value at $100, and when the market opens the next day at 9:30AM EST, it is not $100 any more. It is more or less.

When every day’s an adventure

In February and March, every day was an adventure. It was not uncommon to see that $100 portfolio from the previous day’s close open up at $95 or $105. My guess is we will see this type of wild volatility again, and probably fairly soon. So now, during the relatively quiet times, it makes sense to better understand what is happening to your money while you sleep.

It may be comforting to know that this is not some “dark web” stock market thing going on. It is the fact that when the U.S. market closes at 4PM EST one day, and doesn’t open until 9:30AM the next day, stock prices don’t necessarily sit still. But they don’t move much either. Let me explain.

S&P 500: day and night

The market closes at 4PM each day. But the S&P stock “futures” market is alive for most of the 24-hour period. There are futures for some other major indexes, too.

The futures market for U.S. stocks rests on Friday night and opens again at 6PM EST on Sunday. That’s why folks like me have been conditioned to take a 30-second break during the second half of the 4PM NFL games to check how the S&P 500 futures opened up.

Why are the futures screwing with your money?

This used to be a waste of time. But early 2020 changed that. And it highlights how the stock market is a very different animal than what many of us were first taught 20 or 30 years ago. That’s globalization and wealth effect and technology all colliding!

What happens at night, during the time when only futures are open (since they are open through the trading day, too)? Participants in the futures market, which is often very thinly-traded until close to market open each day, set the price for the S&P 500. That is based on supply and demand, and news and many other things that influence the market during the regular trading day.

To paraphrase a famous sports expression, “you can’t stop the impact of the S&P 500 futures, you can only hope to contain it.” History shows us that all of that “noise” during the 6 1/2 hours of market activity each day has amounted to nearly nada over the past 27 years. The market’s gains have been entirely an overnight phenomenon.


  1. This is an S&P 500-specific analysis. If you just index your portfolio to that, you probably don’t care when your returns are made, only that they are produced.
  2. This is not a ding on active investing. In fact, I think it only strengthens the argument for it. From what I have seen over the years, every day offers the potential to exit a position or enter one at a more favorable price than the day before. If you have an investment process, these can be regularly-occurring “gifts” to take advantage of, at the individual security (stock or ETF level).
  3. This is yet another reason why I think technical analysis is the under-estimated power source in modern investing. Because futures traders have relied on technicals (charts) for decades, well before they became more mainstream. Since every investor’s wealth is impacted by these folks, it helps to understand them and how they think, even if you are not a trader.

Related: Why 60/40 Portfolios Will Fail, And How To Fix Them