Mornings have been lacking in joy this month for investors seeking returns in U.S. stocks.
So far in September, regular-hours trading has featured consistent selling, according to data from Bespoke Investment Group. On average, losses on the benchmark S&P 500 index have been steepest between 10 a.m. and 11 a.m. Eastern (1400-1500 GMT), and every hour thereafter during the session has registered declines.
Overall, the S&P 500 has registered losses for four straight weeks, its longest such streak in a year.
“Besides some ever so modest gains in the opening half-hour, the rest of the day consists of investors hitting bids and unloading stocks,” Bespoke’s strategists wrote in a note on Friday.
September’s activity returned U.S. stocks closer to their long-term trend of outperforming in after-hours trading versus regular-session trading, in contrast with most of 2020, when they outperformed during the regular session.
Since the SPDR S&P 500 ETF Trust, which tracks the S&P 500, launched in 1993, it has posted a 722% return in after-hours trading but an 8.5% loss in trading during the regular session, according to Bespoke.
However, geopolitical and macroeconomic developments have led to after-hours underperformance in several recent instances, said Christopher Murphy, co-head of derivatives strategy at Susquehanna Financial Group. One such period was in spring 2019, when U.S.-China trade tensions reached a peak. In February this year, after-hours returns fell as concerns about the coronavirus pandemic focused largely on Asia, where trading begins after U.S. trading ends.
“A lot of the market-moving stuff is happening after hours, and that’s generally why you see the market rallying overnight,” Murphy said. “When there’s an outside-U.S. shock … those are the few times we see overnight underperformance.”
After-hours underperformance may not last much longer, however, given recent activity.
“After dipping way in the hole earlier in the year,” after-hours performance is “getting closer and closer to taking the lead in 2020 as well,” Bespoke’s strategists wrote last week.