Back in January, we published a Chart of the Day (you can read it here) for Bespoke members that raised quite a few eyebrows. Investors just couldn’t get over one of our findings. What was it? It was that since 1993 when the S&P 500 tracking SPY ETF began trading, ALL of its share price gain has come from moves outside of regular trading hours. That’s right. Had you bought SPY at the open of every trading day since 1993 and sold it at the close that same trading day, your cumulative return over the entire period would be negative (-9.8% through the end of this July).On the other hand, had you bought SPY at the close of every trading day and sold it at the open the next morning, your cumulative return would be +608%. Keep in mind that this doesn’t take dividends into account — it’s only looking at price change — but adding in dividends would actually boost the performance of the “after hours” strategy.

Below is a chart highlighting the strategy’s performance over the years. You can see that the returns diverged significantly in the late 1990s towards the end of the Dot Com bubble. From 1997 through the peak in 2000, investors were consistently bidding up the S&P after hours only to see gains wiped out during the trading day. Then during the bear market that followed the Dot Com peak, the “regular trading hours” strategy plummeted to -50%, and since then it still hasn’t been able to work its way back into positive territory.

Looking at the strategy over a shorter time frame tells you a lot about the current market environment. Below is a chart showing the performance of the “after hours” versus “regular hours” strategy over the last year.

As shown, had you bought SPY at the close every trading day and sold it at the open the next trading day, you’d be up 14.4% over the last year. Had you bought at the open every trading day and sold at the close, you’d be down 0.2%. This means that over the last year as well, all of SPY’s gains have come outside of regular trading hours.