Large- and small-cap stocks this month have seen a stable upward drift during the overnight trading session, with the day session clawing back returns for buy-and-hold investors.
The night effect is a persistent phenomenon whereby overnight markets have historically outperformed the daytime trading session on a risk-adjusted basis. The overnight trading session has delivered much of U.S. large- and small-cap equities’ returns with much lower volatility than the day session over the past 20 years.
See more: Everything Advisors Need to Know About the Night Effect
The night effect has historically been more pronounced in small-cap stocks. Over the past 20 years (2003 through 2022), 100% of the returns generated by the iShares Russell 2000 ETF (IWM ) have come at night.
Between May 1 and May 15, the night session of IWM climbed 2.1% while the day declined 2.4%, bringing buy-and-hold return to -0.3% month to date, "according to NightVision":https://www.nightshares.com/nightvision.
Investors can get targeted exposure to small caps’ night performance with the NightShares 2000 ETF (NIWM ), which offers exposure to the night performance of 2000 small-cap U.S. companies. Investors can use NIWM as a substitute for small-cap exposure, or to complement and enhance existing small-cap exposure by effectively tilting toward the night.
Large Cap Performance in May
Meanwhile, large caps exhibit the same trend month to date. SPY increased 1.3% during the night session. However, the day session, which declined 1.9%, clawed back returns for buy-and-hold investors, "according to NightVision":https://www.nightshares.com/nightvision.
The NightShares 500 ETF (NSPY ) provides exposure to the night performance of 500 large-cap U.S. companies. Conversely, the NightShares 500 1x/1.5x ETF (NSPL ) offers exposure to both night (150%) and day sessions (100%), tilting toward the night.
For more news, information, and analysis, visit the Night Effect Channel.
