One interesting aspect of stock market trading is the “Wild West” — the so-called “after-hours” or overnight market. After-hours sessions almost always have less liquidity and far fewer participants than the day session, which means prices spike up and down much more violently, orders receive poor executions (“fills”), and overall trading can be more costly.
Late on Tuesday evening, when the presidential election began to tilt in favor of Donald Trump, the bottom started falling out of the overnight market. At one point, Dow futures had plunged over -800 points and the S&P lost -5.7% as panicked investors sold. Selling begets selling when “stops” are hit, triggering further selling.
Paul Krugman, an economist at the New York Times, aghast at the thought of a President Trump, tweeted when the markets were falling “If the question is when markets will recover, a first-pass answer is never….we are very probably looking at a global recession, with no end in sight.” His hyperbole was completely overblown, of course, as by market open almost all of the overnight carnage had disappeared. Investors who sold in the after-hours market missed out on the recovery rally that took place that morning and continued the rest of the week.
Bespoke Investment Group used the opportunity to remind investors in a blog post that “The best advice anyone could ever receive in their formative years is that whenever an important and emotional decision needs to be made, it often helps to ‘sleep on it.’” Marketwatch.com added another timeless piece of wisdom: “Teenagers and investors alike should be reminded that nothing good ever happens in the middle of the night!”
