Almost ALL Of The S&P Returns Over The Past 30 Years Has Come Overnight

Benzinga

Benzinga's Premarket Prep host, Dennis Dick, CFA, discusses an interesting statistic on cumulative returns on the S&P 500 over the last 30 years.

Transcript

00:00I mean, look at what happened, Japan maybe kicked it off, Japan up, you can look at the

00:07EWJ if you want to see it, up 2.4% here overnight, that's where the EWJ is.

00:12You've got the European markets trading up 2% and then you have China, that is up huge,

00:18the FXI up 3.21%.

00:20So reasons for the rally, definitely overseas markets ripped and you can say, well, that

00:26was a delayed reaction to our markets, but our markets closed down the S&P.

00:31So we can't really say that, QQQ's closed down, IWM close to closing down, I don't know

00:36if it actually closed red, but gave back all those gains intraday.

00:40So the overseas markets actually saving the US markets here overnight with the incredible

00:45action starting at seven o'clock last night with Japan, started going up and then they

00:49really started buying the S&Ps overnight.

00:53But I want to go to something we've talked about on this show a lot and you can bring

00:57up this chart that we've talked about and it's a paper and this paper has been published

01:06in different places, but Phil McIntosh, not a new paper, but just showing it.

01:11This is Phil McIntosh from the NASDAQ, NASDAQ chief economist, this paper from a number

01:15of years ago, he wrote this back, I don't have the date on it, but the paper is called

01:20Like Night and Day and charting the S&Ps return up till December 29th, 2023.

01:27So the paper is fairly recent because he's got data up till the end of last year.

01:32So he's charting in the last 30 years of returns and it's very important to look at this chart

01:37because this is going to be shocking to a lot of people.

01:41So this is cumulative returns, looking at cumulative returns on a log.

01:46But if you actually look at the stats over the last 30 years, combined intraday returns,

01:54the combined intraday return over the last 30 years, not every year, talking the combined

02:00return intraday over the last 30 years, meaning buying the open and selling the close.

02:04If you were to do that over the last 30 years, you're only up 12% at the end of 2023.

02:11The markets are only up 12%, barely positive, not 12% a year, 12% total.

02:20Overnight returns are up 2,000%, 2,000.

02:27So basically if you buy the open and sell the close every single day for the last 30

02:32years, you're up basically nothing.

02:34But if you buy the close and sell the open, you're up 2,000%.

02:40Put it another way, the entire return in the S&P over the last 30 years is overnight.

02:48The entire thing and nothing is intraday.

02:51So intraday, you just chop around and go nowhere, which I've talked about on this show forever.

02:56Overnight, you ramp up, you typically ramp up.

03:00And what did we see here over the last day?

03:03Nothing returning yesterday, overnight, everything returning.

03:08This paper is the last two days.

03:12This is why, folks, I switched primarily to overnight trading 15 years ago because I saw

03:19my returns were better overnight.

03:22I always say I don't trade 10.30 to 2.30, middle of the day, because it's just choppy

03:27random walk going nowhere.

03:30But a lot of returns are predictable, like all those strategies that I employ, buying

03:34stocks a couple of days ahead of the returns, holding them overnight because they get ramped

03:38up overnight.

03:40This is just a crazy stat, absolutely crazy.

03:44It's telling you, you're intraday day trader, you're day trader that says, I don't hold

03:48anything overnight because there's risk.

03:51Hard to make money when the markets go nowhere intraday.

03:56But if you're a swing trader and you're holding overnight, or if you're an investor and you're

03:59holding overnight, or if you're an overnight trader like me, there's all kinds of excess

04:04returns in the overnight markets.

04:07But you got to take risk.

04:08The risk is news comes out on your stock overnight.

04:11Other things can happen.

04:12You know, we know there's macro headlines that come out overnight.

04:16But just shocking, shocking statistic there.

04:19And again, Phil's not the only person that said this.

04:21This has been out there.

04:22It's not like this paper just enlightened us.

04:24We know that there's always overnight, but he's done a really nice job of simplifying

04:28it.

04:29Just go scroll up a little bit.

04:30It says, in fact, you can see those stats over 30 years in this chart, intraday returns.

04:36Go down a little bit.

04:37You just missed it.

04:38Go slower.

04:39Right there.

04:40Show that.

04:41Intraday returns, barely positive over the last 30 years.

04:45Cumulative, not 12% a year, 12% total.

04:49Overnight returns, up close to 20 fold.

04:53So keep that in mind, folks, when you're sitting here and trying to buy stocks intraday and

04:57I don't hold overnight.

04:59It's a tough gig.

05:00It's a lot better gig to be looking at strategies that include overnight trading, especially

05:06if you're a long investor.

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