Daily Money - Issue #238: Stock market after dark??

plus Usher’s watch + spice clubs
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May 15, 2024 • Issue #238
Dollar Scholar

Hi y’all —

Currently, the New York Stock Exchange’s core trading hours are 9:30 a.m. to 4 p.m. ET, Monday through Friday. But it hasn’t always been that way.

In the early days of the NYSE, per its website, “brokers gathered twice a day to trade a list of 30 stocks and bonds,” then “from the podium the president called out the name of each security in turn, while the brokers shouted bids and offers from the chairs assigned to them.” (Sounds chaotic.)

By the 1870s, they'd determined that specific trading hours were necessary and developed a schedule that has been tweaked several times in the past few centuries. Now, we may be looking at another adjustment. 

A few weeks ago, the Financial Times reported that the NYSE has begun “polling market participants on the merits of trading stocks around the clock.” And while the NYSE is just one stock exchange of many, it is the world's largest, so this would be a big shift with major repercussions.

Should the New York Stock Exchange be open 24 hours?

Having this discussion now actually makes a lot of sense, according to Stephanie Guild, head of investment strategy at Robinhood. Stock trading has become increasingly electronic over time, but the rise of cryptocurrency — which trades nonstop — has given the conversation new urgency.

So has the uptick in digital traders participating in existing after-hours markets. Robinhood, for instance, offers 24-hour trading for certain stocks and ETFs five days a week. It’s seen over $10 billion in overnight trades since launching in May 2023.

Increasing global market demand is a factor, as well. Guild says currency values are partially driven by a difference in interest rates. As you know unless you've been living under a Dollar-Scholar-less rock, the U.S. has had especially high interest rates lately, which has supported a strong dollar and increased interest in U.S. equities.

But if you’re an investor living in another country who wants to invest in the U.S. market to take advantage of this, the NYSE hours can be challenging: “You’d be up in the middle of the night,” Guild adds.

i love a man with a bedtime. boys don't need to be staying up late and having thoughts. that's how we ended up with the stock market

The exchange's current hours of operation can be a hurdle for U.S. investors, too.

Andrew Crowell, vice chairman of wealth management at D.A. Davidson, says a 24-hour market would be convenient for traders who have theories they'd like to test out by buying shares or selling shares ahead of open. 

“People want to express their investment philosophy, and they don't want to wait for the whole world to wake up,” he adds. “They want to be able to silently get ahead of the crowd.”

While expanded hours would give these investors the opportunity to follow through on their instincts, a decision by the NYSE to move to round-the-clock hours could also come with consequences.

For one, the 9:30-to-4 schedule serves as sort of a guardrail, preventing many investors from making impulsive decisions in reaction to their emotions or the news.

That's no small thing, since research suggests that the most successful investors are usually the ones who ride out the highs and lows and stay committed to their overarching goals... which could be undone by having access to the market a 24/7 (or 24/5, for that matter).

“The long-term goal is to allocate properly, hold on and be committed to your investment plan,” Crowell says. “I do worry that on a 24-hour, Monday through Friday exchange, people will panic at the wrong time — that second glass of Chardonnay is not a good precursor to making a buy or sell decision on a Tuesday night.”

There’s also a risk associated with price discovery, which is the act of determining a price for an asset. Because volumes are highest at the opening and closing bells, Crowell says, that’s when investors can get the truest reading of what something is worth. 

“To get the most accurate, available price in the marketplace, you want to have the most trading volume possible,” he says. “The difficulty with a 24-hour exchange would be that if Julia wants to sell her shares at 2 in the morning, there's going to be a buyer — but that buyer could have an undue impact on being able to dictate price to you.”

Admittedly, not everyone would upend their schedules immediately. Guild predicts the largest volume of stock trading would still come from U.S. institutions, and those trades would still happen during the day, if the NYSE were open 24 hours.

That means it would be extra-important for traders to be careful about what they're getting into, given that the market can react in one way during lower-volume sessions and a different way way during high-volume ones.

Even so, Guild says she's hopeful a 24-hour stock market would make price movement a little less volatile. Think: If expanded hours led to more round-the-clock volume, we could see more diverse opinions about a stock rather than just a few players’.

And if those players are smart about it, they could make this work to their advantage.

“If you really are committed to staying disciplined, being able to trade 9 o’clock at night Eastern shouldn't change your strategy,” she says.

The bottom line
(but please don't tell me you scrolled past all of my hard work)

Expanding the NYSE’s trading hours is a real possibility: It’s happened before, and as society becomes increasingly online, there are a handful of reasons some folks are pushing for it to happen again.

With opportunity comes risk, of course, but it may be time for Wall Street to get a little more convenient for those not located on the East Coast.

“If you want to go onto Amazon and pick up a sweater or something, it's available to you 24/7,” Crowell says. “We’re in an on-demand world now.”

FICO
via Giphy

Smart MONEY MOVE
no, you can’t ‘double your HVAC bill and give it to the next person’

HomeHome warranties? Totally fetch. Why? Because a $15,000 repair bill is exactly the kind of drama you don’t need. So if your AC decides to go all Gretchen Wieners on you and randomly breaks down, a home warranty could help cover the cost of repair or replacement. You can save yourself money, stress, and sweat. (Gross.)

Don’t wait for a heat wave — check out Money’s best home warranties list to find options with discounts and free online quotes.

Receipt of the week
check out this wild celebrity purchase
Usher
via Instagram

Singer Usher walked the Met Gala green carpet last week wearing a bedazzled suit with bright red roses and a watch worth a cool $5 million. Usher’s timepiece, formally titled the Ruby Billionaire III, has over 700 rubies... but it’s the price point that has got me like “oh my gosh.”

Internet gold
five things I'm loving online right now
1
A few years ago, I wrote a story listing 200 non-book items you can check out from the library for free, which is perfect to revist as you start coming up with summer activities.
2
But I might just have to update that article to include spice clubs, which are the hottest trend in public libraries right now. Librarians package and distribute hundreds of spices and recipes to patrons who want to experiment with different cuisines. (In Ohio, one library just did zaatar; in Washington, another promoted sumac.) “Everyone mentions what they made, what they liked about it, what they didn’t like about it,” one organizer told the American Libraries Magazine. “Would they have it again? Would their husband eat it? Which is a big thing for some people.”
4
Fed up with the cost of college and in pursuit of higher wages, Gen Zers are increasingly seeking trade jobs. Good for them! I’m rooting for people like 20-year-old Tanner Burgess, who told the Wall Street Journal he chose to work as a welder partially because “I thought it was cool because it had a lot of fire.”
5
This is how fast the USPS eagle is going.

401(k)9 CONTRIBUTION
send me cute pictures of your pets, please
Lily
via David Calhoun
Meet Lily, a pup who lives in Malaysia and is in favor of leaving the NYSE open twenty-fur hours a day. If you look at this photo closely, you'll spot another critter quietly participating in the stalk market.

See you next week.

P.S. Do you think the NYSE should be open 24/7? What’s your most-used spice? When was the last time you visited your local library? Send stonks to julia@money.com.

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