Volatility was a key theme in markets in March, closing out a turbulent first quarter.
U.S. large-caps had their strongest start to the year since 2019, and the second-strongest first quarter in the past decade, leading to a significant difference in returns between large-caps and small-caps.
During the month, the SPDR S&P 500 ETF Trust (SPY ) climbed 3.7%. The night session accounted for 1.7% of performance while the day session increased 2%. Meanwhile, the iShares Russell 2000 ETF (IWM ), declined 4.9%, with the day contributing 6% of declines, partially offset by the night session’s 1.3% gain.
While the night and day sessions of SPY contributed similar returns in March, the day session was twice as volatile as measured by the number of tail days in both directions (< -1.00 or >1.00).
Looking at SPY, 48% of buy-and-hold sessions in March were in the tails, exceeding the 20-year historical average of 26% of hold sessions in the tails. The day session had 35% tail sessions, compared to 19% on average, and 17% of the night sessions were in the tails compared to 9% historically, according to data from NightShares.
See more: Investors Capturing the Night Effect Avoided S&P 500 Losses Last Week
The NightShares 500 ETF (NSPY ) offers focused exposure to the night performance of 500 large-cap U.S. companies. The NightShares 500 1x/1.5x ETF (NSPL ) tilts toward the night, offering exposure to both night and day sessions and providing investment results, before fees and expenses, that correspond to 100% of the performance of a portfolio of 500 large-cap U.S. companies during the day and 150% of the portfolio performance at night.
There was a significant gap in returns between IWM’s night and day sessions. Accounting for the day session’s disappointing performance, day had twice the number of left tail days than right tail days.
Looking at IWM, 70% of buy-and-hold sessions were in the tails in March, compared to the historical average of 40% of hold sessions in the tails. The day session had 52% tail days, compared to 33% of day sessions historically being in the tails. Nearly 39% of small-cap night sessions were in the tails, compared to 13% historically, according to data from NightShares.
The NightShares 2000 ETF (NIWM ) provides exposure to the night performance of 2000 small-cap U.S. companies.
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