Night Session May See Greater Returns From CPI Release

If markets celebrate this week’s CPI release, investors may want to focus on the night session to capture greater returns.

The night effect is a persistent phenomenon where equities have historically performed better during the night session when local exchanges are closed than during the day when markets are open.

The timing of information flow and availability is a frequently stated rationale for the night effect. The highly anticipated monthly CPI reports are released prior to market open (at 8:30 am ET), during the night session.

Notably, the night session has been demonstrated to be more reactive to CPI releases than the day session.

Since January, the night session has been up when actual CPI comes in below the consensus estimate. Conversely, the night is down when CPI comes in above consensus. This makes sense as one would expect the market to react positively to news that inflation, as measured by CPI, is below what people expect, according to NightShares.

The Bloomberg CPI consensus estimate (median) for July’s release is 3.1%. If actual CPI comes in at or below that figure, it’s expected the night session will rally. Likely even more than the day session.

How Large Caps Have Responded to CPI Reports During the First Half of 2023

Year to date, the night session of the SPDR S&P 500 ETF Trust (SPY) has reacted positively to CPI reports during five out of the six releases. The day session, however, has reacted negatively two times.

Notably, on the two occasions when the day session responded negatively, the night session posted impressive rallies. In April, the day session was down -0.93% while the night was up 0.53%. And in May, the day session declined 0.25% while the night was up .72%.

In June, both sessions rallied on the CPI release. However, the night session still outpaced the day session by over 4 basis points.

The NightShares 500 ETF (NSPY) offers efficient, cost-effective exposure to the night performance of U.S. large caps, comparable to the night session of the S&P 500.

Alternatively, investors can leverage the night session (without giving up day exposure) with the NightShares 500 1x/1.5x ETF (NSPL). The fund aims to provide returns that correspond to 1x the performance of a portfolio of 500 large-cap U.S. companies (comparable to the S&P 500) during the day and 1.5x the portfolio performance at night.

For more news, information, and analysis, visit the Night Effect Channel.