Stockbridge Private Wealth Management

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Eric Ludwig

What Happens Next? Why “What Goes Up” Doesn’t Apply to Markets

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After Q3’s stellar performance, I’m hearing the same concern: “What goes up must come down.” Here’s the thing: that’s physics, not finance.

Isaac Newton discovered gravity by watching apples fall from trees. But companies aren’t apples. They generate earnings, innovate products, and create value over time. Research from Dimensional Fund Advisors found that over 94 years, the S&P 500 hit new all-time highs in more than 30% of months—and buying at those peaks produced similar returns to buying at any other time. The market isn’t fighting gravity; it’s climbing stairs.

Speaking of surprises, here’s something that caught my attention: gold and the Nasdaq both hitting record highs simultaneously. Gold surged 45% this year to nearly $3,800 per ounce while tech stocks soared. That’s unusual—typically gold rallies when investors flee from risk. This time, both thrived together, reflecting a world where investors seek both growth and protection amid uncertainty.

So what’s next? The AI spending boom has real legs. The market is projected to grow from $515 billion in 2023 to $900 billion by 2026, with forecasts reaching $3.5 trillion by 2033. This isn’t hype—companies are embedding AI across operations, from customer service to product development, driving productivity gains of 20%-30%.

Goldman Sachs raised their year-end S&P 500 target to 6,900, while other firms project similar double-digit gains. The fundamentals support it: corporate earnings are growing, the Fed is cutting rates, and the AI revolution is just beginning. Even without AI, history shows the market trends upward over time as companies adapt and innovate.

The risk isn’t that stocks are “too high”—it’s that investors might sit on the sidelines waiting for a pullback that never comes. Consider this: money market funds just hit a record $7.3 trillion in late September. That’s over $7 trillion sitting in cash earning yields that will decline as the Fed continues cutting rates. Even if just 10% of that money rotates into stocks over the next year, that’s $700 billion of fresh buying power—a major catalyst for continued gains.

Market timing rarely works. What does work? Staying invested through the ups and downs, maintaining your allocation, and letting compounding do its job.

The best time to invest was yesterday. The second best time is today.

Q3 2025 Market Review: From Panic to Records

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After a tumultuous start to 2025 with April’s tariff shock, the third quarter delivered something few expected: one of the strongest market rallies in recent memory.

     The S&P 500 closed Q3 above 6,600 for the first time in history, hitting 6,615 on September 15th. For the quarter, stocks gained over 5%, bringing the year-to-date return to double digits. The Dow Jones breached 46,000, while even small-cap stocks participated in the rally.

     The big catalyst? The Federal Reserve finally cut rates in September, lowering the target range by 0.25% to 4.00%-4.25%. After holding rates steady for nine months, the Fed signaled that concerns about the labor market now outweigh inflation worries. With Chair Powell characterizing the move as “risk management” in a softening economy, markets cheered.

     Corporate earnings continued to surprise to the upside. An impressive 81% of companies beat earnings estimates in Q2, one of the highest percentages in recent years. The AI boom and strong consumer spending fueled much of this strength, though market leadership finally broadened beyond just tech giants.

     On the fixed income side, bonds posted modest gains as rates declined. The Bloomberg Aggregate Bond Index was up slightly as investors positioned for continued Fed easing.

     Here’s what caught my attention: a recent Nationwide study I was cited in found that 48% of workers shifted their retirement savings to more conservative investments during this year’s volatility, potentially locking in losses or sacrificing long-term growth for short-term comfort. This behavior gap is exactly what hurts returns over time.

     The lesson? Markets reward those who stay disciplined during volatility. From April’s lows to September’s highs, investors who stuck with their plans captured one of the fastest recoveries in market history. Those who panicked missed it.

     As we head into Q4, remember: your biggest investment risk isn’t market volatility, it’s how you react to it.

Want to discuss how current markets affect your retirement plan? Schedule a conversation with our team →

Eric Ludwig, Ph.D., CFP®, RICP® is CEO of Stockbridge Private Wealth Management and Director of the Center for Retirement Income at The American College of Financial Services. His research has been featured in Barron’s, Forbes, Wall Street Journal, and he was recently cited in Nationwide’s research on investor behavior.

The Overnight Stock Market Secret

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By Eric T. Ludwig CFP®

Published 4/8/2020

When do stocks move the most?

QUESTIONS:

  • When does the stock market move the most: when it’s opened, or closed?
  • During the pandemic crash, how have stocks performed during the day vs overnight? 
  • Do dividends make a difference to stock market performance?

As stocks started dropping in mid-February and the bottom fell out in March, something really started to bother me: why did it seem like all the market moves were happening overnight?  I’d wake up in the morning and check the futures market, and the stock market would already be down 5%…before the opening bell rang!

Was this right?  Let’s look:

I analyze the ETF “SPY”, which tracks the S&P 500.  (On a side-note, SPY is the oldest ETF, which started trading in 1993).

From January 1st to April 7th of 2020, SPY is down -18% (including dividends, which we’ll come back to). 

Now let’s divide the performance into two buckets: the movement during open trading hours, and the movement overnight.

Q1 2020: SPY Performance during:

Trading hours: +10%

Overnight: -25%

Look at those numbers again!  This year, if you would’ve woken up and bought the SPY on each market open, then sold it on the each close, you’d be UP 10% for the year!  On the other hand, if you would’ve bought the SPY at 3:00 pm each afternoon, then sold it the next morning, you’d be DOWN -25% for the year. 

The suspicion was correct: not only is the majority of the market movement taking place when the market is actually CLOSED, stocks were actually creeping up when the market was open.  Very strange. 

This made me wonder if the phenomenon is some recent “glitch”.  Doesn’t all the “news” and trading happen during the day, and therefore move the markets during the day?  That would make sense.

Let’s back up a second.  If you bought SPY on it’s first trading day on 1/29/1993, as of April 7th, 2020, you’d have a gain of exactly 900%.  Get your financial calculator out, and you’ll find that’s a compound annual rate of 8.9%.  Pretty sweet!

Now let’s ask, since 1993, what is the daytime performance?  In other words, every day you woke up and bought SPY at 8:30 am at market open and sell it every day at 3:00 pm market close.  Over the last 27 years, you would be…DOWN -3%!  What!  Yes, it’s very strange, but true.  But the story gets stranger.

We know the buy-and-hold investor clocked in 900%.  The own-it-only-during-the-day trader lost -3%.  So now we know all the stock market performance happens overnight!  That in itself is pretty incredible to me.  I guess watching CNBC during the day is more of a waste of time than I realized.  Just to repeat…almost all the return in the market is happening overnight.

Pop-quiz: what is the overnight trader’s return?  Common sense would be 900% – 3% = 897%.  But, that’s incorrect.  The overnight trader is up 522%.  How could that be = dividends!

1/29/1993 – 4/7/2020: SPY Performance during:

Trading hours: -3%

Overnight: 522%

Yes, dividends!  The overnight trader is never receiving dividends because he sells out every morning.  The dividends from the S&P 500 since 1993 attribute 378%.  The overnight performance is the other 522%.  And the daytime performance is -3%.  Crazy, but true.

This solidifies 3 points:

  1. The “news” and “big market moves” during the day, don’t matter as much as we thought, if at all.  It’s all about what happens overnight
  2. While the S&P 500 has risen 900% since 1993, 378% of that return is from dividends…Dividends matter!
  3. Buying-and-holding gets you all the benefits of the overnight moves AND all the dividends.

Summary:

  • The overwhelming majority of the stock market moves take place when the market is closed, not during the normal trading hours.
  • For the first 3 months of 2020, the stock market was positive during normal trading hours, and all the losses took place overnight.
  • Should we only own the overnight session then?  Don’t forget about dividends!  Missing out on dividends would mean missing out almost half the S&P 500’s return over time! 

*calculations used Yahoo! Finance data. Calculations are the authors. This is not an investment recommendation to buy or sell any investment.

November 2018 Market Update

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In this video we discuss:

• How rate changes and Federal Reserve Jay Powell’s comments have impacted markets in November.

• Current Market Valuations and expectations of US Stock market returns over the next 10 years

• Current Investor Sentiment readings, and what they mean

• A big IF from the G20 summit IF something positive happens on trade with Trump and China

Stock and bond market update provided by Eric Ludwig CFP®, CEO of Stockbridge Private Wealth Management.

View historical PE ratios: http://www.multpl.com/shiller-pe/

AAII Investor Sentiment ratio: https://www.quandl.com/data/AAII/AAII…

Investors Intelligence Advisor’s Sentiment Report: http://www.investorsintelligence.com/…