This is an article suggesting ways you can make more cash on the S&P 500.
The S&P 500 is basically a list of the top 500 biggest public companies in the U.S., and it’s essential for determining how to make more cash in the stock market.
Tracking how well these companies are doing, the S&P 500 helps you find ways to make more cash through investments.
Think of the S&P 500 like a giant mall filled with the biggest U.S. companies.
Instead of shopping for clothes, you’re shopping for businesses that sell all kinds of stuff you like.
You buy a piece of each business that sells stuff you like and think a lot of your friends will like too, and those pieces help you make more cash as the businesses make more cash selling whatever they’re selling.
In this article
Just like a mirror reflects what you immediately look like, the S&P 500 is curated to show you 500 of the largest companies listed on U.S. stock exchanges (like the NYSE or NASDAQ), giving you a snapshot of how these companies—and essentially the broader market—are doing.
The index is a bit like an exclusive club, and membership is based on certain criteria like market capitalization (how big a company is), profitability, liquidity, and whether it’s a U.S.-based company, among other factors.
It’s the number that stays the same, but the actual companies in the S&P 500 definitely change. They aren’t always the same 500.
Even though the S&P 500 aims to represent the largest 500 companies, it’s not simply based on size alone. If a company falls off in performance or doesn’t meet the criteria anymore, they can get booted out and replaced by another.
Likewise, if a company grows or becomes more influential, it might be added to the list. There’s a whole committee that oversees this, deciding who gets in and who’s out
When people say, “the stock market is up,” they’re often talking about the S&P 500.
When these top 500 companies do well, their stocks go up, and you make more cash if you’re invested in the S&P 500.
DISCLAIMER: The following are strategies that may enhance your potential returns on the S&P 500. However, please note that this information should not be construed as professional advice. It is strongly recommended that you seek guidance from a qualified financial and investment analyst regarding any suggestions provided in this article.
Everyone, from hedge funds to Uni grads, is trading in the S&P 500.
Even if you’re not actively trading, your 401(k) or retirement savings might be tied to the S&P 500, meaning its performance can directly influence how you make more cash in the long run.
7 things that make the S&P 500 rise or fall
A lot of different things can cause the S&P 500 to rise or fall.
Kind of like how certain events can make prices at your local grocery store or market fluctuate. The most common reasons are:
Company Performance/Corporate Earnings Reports
/As companies in the index report higher-than-expected profits, the S&P 500 tends to go up.
But if profits disappoint, or future earnings expectations look grim, the index can slide.
Think of it as a big “grade” for the companies in the index.
When the companies in the S&P 500 (like Apple or Google) release positive news—such as strong earnings reports (profits), new product launches, or major partnerships—their stock prices usually go up.
If most of the companies in the S&P 500 are doing well, the index goes up overall.
On the flip side, bad news like missed earnings, scandals, or product failures can make stocks go down.
Changes in the Index
/When a company gets added or removed from the S&P 500, that can shake things up. If a high-performing company joins the index, it can lift the overall performance.
Same thing, if a struggling company exits, it might give the index a boost by getting rid of dead weight.
Economic Conditions/ Data
/The economy affects everyone, and the stock market is no different. If the economy is growing—people are working, spending money, and businesses are expanding—stocks usually rise because companies are expected to make more money.
But if the economy is slowing down (unemployment rises, inflation spikes, interest rates go up), it often leads to a market drop because companies are expected to make less profit.
Indicators like GDP growth, unemployment rates, or consumer spending can move the S&P 500.
Strong economic data suggests that businesses will do well, pushing the index higher. Weak data sends the opposite signal, often pulling it down.
Interest Rates
/When interest rates are low, people and businesses are more likely to borrow money and invest it. This boosts company growth, which pushes up stock prices.
But when interest rates rise, borrowing gets expensive, and people are less likely to spend and invest.
This can hurt company profits and drive down stock prices.
Inflation
/If inflation is running high, it can erode corporate profits and consumer spending power, which is generally bad news for stocks.
The fear of inflation often leads to speculation about rising interest rates too, creating a one-two punch for stock prices.
Inflation does more than just chip away at corporate profits and consumer spending power—its impact on the S&P 500 can sneak in through a bunch of less-obvious doors.
Global Events
/Things happening around the world—like wars, natural disasters, or political changes—can have a huge impact on the market.
For example, if there’s political instability in a country that supplies oil, energy costs could spike, impacting many companies in the S&P 500.
Investor Sentiment
/This is basically how people feel about the market.
If investors are confident and think the economy will keep growing, they’ll buy more stocks, pushing prices up.
But if they’re worried about a recession or a crash, they’ll sell stocks, which pushes prices down. It’s like when people panic-buy or avoid certain products in a regular store because of rumors.
7 Reasons why understanding each of those factors can help you make more cash on your S&P 500 investments
Even if you’re not actively watching the market, these things can still affect your financial life.
Making cash off your S&P 500 investments without understanding why it moves is a bit like trying to drive a car blindfolded—possible, but you’re definitely not in control.
1 – Without understanding what drives the S&P 500, you’ll be making random moves.
2 – If you don’t actually know what makes the S&P 500 move, you’ll start blurring lines between the Dow, the NASDAQ, Bitcoin, and your friend’s cousin’s crypto scheme.
3 – If you don’t know that drops are part of the game, you might freak out and sell at the worst times—like during a regular ol’ correction, which happens all the time. Then you’re the person who sells low and misses out when it bounces back.
4 – Dodging bad advice from “that” friend.
5 – When the market is on the rise and you don’t really understand why, you might feel like a genius and start bragging about your investment gains. Then, when the market inevitably cools, you’re left awkwardly explaining why your returns aren’t as stellar as you made them sound. Cringe.
6 – As you get into investing, people might ask you what you think of the market. If you don’t know what’s going on, and you’re just like, “Uhhh, it’s a long-term hold, right?” you’ll feel awkward real fast. Knowing the ins and outs lets you throw in a nugget of wisdom and flex a little
7 – If you don’t understand what makes the market tick, you won’t know when to hold steady, reinvest, or adjust your approach to keep your money growing safely.
21 lowkey genius strategies to make more cash in the S&P 500
3 CLEVER STRATEGIES TO MAKE MORE CASH FROM HOW COMPANY PERFORMANCE AFFECTS S&P 500 MOVEMENTS
You can be a bit of a lowkey genius and use your understanding of company performance and corporate earnings reports to boost your S&P 500 investments and make more cash.
These strategies aren’t just for buying and holding, but for timing things and reading the room.
1. Play the Pre-Earnings Hype Game (But Exit Before the News Drops)
Companies love to hype themselves up before earnings reports drop. Analysts and investors will speculate like crazy if they think a company will beat expectations.
The stock price often starts climbing before the actual earnings come out because everyone’s excited.
If you know a company tends to overperform or has a strong quarter (good sales, new product launch, etc.), you can buy shares before that earnings report is released.
But here’s the key: sell right before the report is actually released.
Why? Because if the earnings come in just below expectations, the stock can still fall, no matter how good the numbers are!
This is called a “buy the rumor, sell the news” strategy. You cash in on the hype, and you’re not holding the bag if things don’t go as expected.
2. Use Earnings Misses to Buy Big Names on Discount
Even the best companies sometimes miss earnings expectations, and when that happens, people freak out and sell like there’s no tomorrow.
This makes the stock price drop fast, sometimes overreacting to a tiny earnings miss (say they were just a few cents short on profit).
But here’s where the genius move comes in: if you know the company is still solid long-term (it has good fundamentals, strong market position, etc.), you can swoop in during the dip and buy the stock at a discount.
Big-name companies that miss earnings often recover quickly, especially if it’s a one-off issue and not a sign of deeper problems.
So, you’re buying low during the panic, then watching the stock price climb back up as things stabilize, making a solid profit once the dust settles.
3. Ride the Earnings Surprise Wave (Post-Report Jump)
Sometimes, companies totally crush earnings expectations—like they outperform in a big way, especially if analysts had low-balled them.
When that happens, the stock can surge after the earnings report is released. Most investors miss this opportunity because they assume all the gains happen before the report, but that’s not always true.
If the earnings surprise is strong enough, it can trigger a wave of buying as more investors jump on the bandwagon after seeing the numbers.
To really make more cash, after an earnings beat, if the stock price jumps and continues rising, you can ride that momentum upward.
Many times, analysts will revise their price targets and upgrade the stock after a big earnings beat, causing even more buying.
By timing your entry right after the surprise, you can catch the second wave of price increase, holding for a bit before selling at a higher price once the excitement starts to cool off.
SIMPLE BREAKDOWN
- Pre-Earnings Hype: Buy before the report, sell right before it’s announced to avoid post-report selloffs.
- Earnings Miss Dip: Buy strong companies when they miss earnings and people panic-sell, then ride the recovery wave.
- Earnings Surprise Surge: Buy after an earnings beat to catch the post-report surge, riding the momentum as analysts and investors catch up.
These strategies let you read between the lines of earnings reports, using both the psychology of the market and timing to make moves that can get you ahead of the typical “buy and hold” crowd.
…but first, figure out Bear and Bull Cycles!
Bear and bull markets are the cycles that define the S&P 500. They impact how we invest and the broader economy. Knowing these market phases helps you navigate tough times and spot growth opportunities.
Bull Markets
Bull markets are characterized by increasing stock prices and high levels of investor confidence. These phases usually occur after an economic recovery or growth.
For instance, after the 2008 Financial Crisis, the market rose significantly until early 2020, driven by low interest rates and quantitative easing measures.
Bear Markets
Bear markets are characterized by declining stock prices and are frequently accompanied by economic downturns.
During these times, investors tend to become more cautious, which can exacerbate the economic decline.
A notable example of this phenomenon is the 2008 Financial Crisis, which was triggered by the collapse of the housing market.
Understanding bear and bull market cycles gives you a better sense of timing your moves on the S&P 500.
In a bull market, stock prices generally rise, so you can ride the momentum by buying into strong-performing companies early and selling when valuations peak.
You’re not just riding the wave, but actively looking for when the upward trend might slow, using that window to lock in gains.
In a bear market, where stocks decline, it’s about minimizing losses while identifying opportunities. Knowing when the market is likely to dip or recover allows you to strategize.
You might short certain stocks, buy put options, or identify undervalued stocks during the downturn, positioning yourself to profit when the market recovers.
Each cycle presents a distinct way to maximize returns if you’re paying attention to how the market moves.
The real advantage comes from anticipating the shifts between these cycles.
Spotting early signs of a bear market lets you adjust your portfolio before losses stack up, while recognizing an incoming bull market gets you in early on the rebound.
Being clever here is about adapting and adjusting your approach before the broader market catches on, giving you an edge in accumulating cash.
Understanding bear and bull market cycles lets you map out tactical entry and exit points, timing the broader market momentum, but it’s also about leveraging those cycles to anticipate sector rotations and shifts in capital allocation.
The top 1% don’t just ride out the cycles—they pivot within them.
During a bull market, they might ride high-performing sectors, but when signs of a bear market show up, they know when to exit those overvalued positions early and move to defensive stocks or sectors.
This cyclical awareness creates more opportunities than just following trends blindly.
They also know that during the transitional periods between bull and bear markets, volatility increases, giving them the chance to profit from short-term swings, while the rest hesitate or panic.
Understanding when the market is on the verge of shifting directions lets them lock in profits ahead of the crowd or buy in when stocks are unjustifiably sold off.
It’s these micro-movements within the larger cycles that most investors ignore but can be exploited for consistent cash flow.
Lowkey genius strategy during Pre-Earnings Hype
In a bull market, “Pre-Earnings Hype” works because investor sentiment is generally optimistic, and stocks tend to rise in anticipation of positive results.
The bull cycle amplifies this strategy, making it easier to benefit from the run-up before earnings.
However, in a bear market, this strategy can backfire, as the general market mood might weigh down even stocks expected to perform well, making the pre-earnings rally weaker or nonexistent.
In a bear market, the lowkey genius strategy with “Pre-Earnings Hype” would be flipping the typical approach.
Instead of betting on the run-up before earnings, you could focus on short-selling or using put options leading up to the report.
The reasoning is that in a bear market, even good earnings often don’t spark significant gains, as the broader market sentiment remains negative.
Stocks might still drop or stay flat due to overall pessimism, even if the company’s fundamentals are strong.
Another clever twist would be to buy stocks after the earnings report, not before. If a company beats expectations, but the market reaction is muted due to the bear cycle, you could catch stocks at a discount.
In this scenario, you’re exploiting the disconnect between the company’s actual performance and the market’s overreaction or lack of response, positioning yourself for gains when the market eventually rebounds.
Application during Earnings Miss Dip
When it comes to the “Earnings Miss Dip,” figuring out the mindset during a bear market can really help.
Investors overreact in fear, which causes strong companies to be oversold after an earnings miss.
If you recognize that the market is in a bear cycle, you’ll know to focus more on these opportunities, because in these conditions, the selloff is often exaggerated.
In a bull market, this strategy works too, but the dip is usually less pronounced, and the recovery might be faster.
A clever strategy for “Earnings Miss Dip” would be to aggressively buy the dip after an earnings miss, but with a sharper focus on speed and selectivity.
In a bull market, investors are generally more forgiving of short-term misses, especially if the broader trend is up, so the recovery tends to be quicker.
Understanding that the overall market is bullish, you can confidently snap up shares of strong companies at a discount, knowing the upward momentum will likely resume as the market shrugs off the earnings miss.
The real edge comes from acting fast, before the broader market realizes that the miss is temporary.
You’re capitalizing on the overreaction, knowing the bullish cycle will likely correct that overreaction sooner than in a bear market.
In addition, selectively targeting companies with strong fundamentals and growth potential, despite the short-term miss, ensures that you’re catching high-quality stocks that will recover and likely surpass previous highs.
The bull market psychology of optimism and “buy the dip” plays into this strategy perfectly, making it easier to multiply your gains quickly as the stock bounces back.
Application during Earnings Surprise Surge
With “Earnings Surprise Surge,” this strategy aligns more easily with a bull cycle, where positive earnings reports lead to strong momentum and continued upward movement.
In a bear market, this strategy can still work, but it requires more caution, as the post-earnings surge might be short-lived due to broader market pessimism.
In a bear market, the lowkey genius strategy for “Earnings Surprise Surge” would be to take a more surgical, short-term approach by capitalizing on the brief spike after a positive earnings report, then exiting quickly.
Since bear markets are dominated by pessimism, even a strong earnings beat won’t typically result in sustained upward momentum.
Instead, you’d see a short-lived surge before the broader bearish sentiment drags the stock back down.
To maximize profit, you’d ride the immediate post-earnings surge by buying the stock or using call options just after the positive earnings report, but set a clear exit strategy within a day or two.
The key here is not getting greedy or expecting the stock to continue rising for long, as the bear market sentiment will likely cut the rally short.
You’re aiming to profit from the initial jump in price before other investors realize the surge is losing steam.
Additionally, pairing this strategy with trailing stop orders can be smart.
These orders let you lock in gains while automatically selling if the stock begins to dip again, protecting your profit in a market where downward pressure remains strong.
You’re essentially exploiting the brief optimism in a bearish environment, cashing in before reality sets back in.
And then understand Economic and Psychological Factors that influence the S&P 500.
Economic indicators such as GDP growth, unemployment rates, and inflation significantly impact market conditions. Investor sentiment can shift between optimism during bullish trends and pessimism during bearish trends, which in turn affects market behavior.
Notable Market Highs and Lows
- Great Depression (1929-1939)
- Dot-Com Bubble (1995-2000)
- 2008 Financial Crisis
- 2010s Bull Market
- 2020 COVID-19 Pandemic
Lessons for Investors
- Diversify your portfolio.
- Stay calm during market volatility.
- Focus on companies with solid fundamentals.
- Maintain a long-term perspective.
READ: How to make money doing anything
3 CLEVER STRATEGIES TO MAKE MORE CASH FROM HOW CHANGES IN THE INDEX AFFECTS S&P 500 MOVEMENTS
Monitoring the S&P 500 involves analyzing sector performance, which reflects how various segments of the market are doing.
The S&P 500 includes sectors like technology, healthcare, financials, and consumer staples, each representing companies in similar industries or with related business activities.
Investors check out sector performance to see which parts of the market are doing well and which aren’t. This helps them decide where to put their money.
If tech stocks are doing great, they might buy more of those. On the other hand, if healthcare stocks are struggling, they might sell some of those.
Economic conditions, regulatory changes, and technological advancements influence sector performance. Watching these factors and their impact on different sectors, can sharpen investors’ strategies.
Understanding specific sector performance gives you a significant edge because different sectors simply react differently to market cycles, interest rate changes, and economic conditions.
The top 1% use this insight to time their moves across sectors, rather than just following the broader market trends.
They recognize that in a bear market, defensive sectors like utilities or consumer staples tend to hold up better, while cyclical sectors like tech or industrials tend to outperform in a bull market.
This knowledge allows them to rotate their investments into the right sectors at the right time, capturing gains others miss.
In a bear market, they might shift capital to sectors that are more resilient or even benefit from downturns, like healthcare or energy.
When the market turns bullish, they’re already positioned in sectors that thrive in periods of economic expansion, like technology or financials.
This sector rotation strategy lets them not just follow the overall S&P 500 trend, but to outperform it by concentrating on sectors that are poised for gains, even when the rest of the market might be struggling.
On top of that, sector performance can also highlight early warning signs or opportunities that the rest of the market hasn’t yet fully priced in.
The top 1% know to look for sector divergences—when one sector moves counter to the market, it can signal an upcoming shift.
Acting on these signals before the majority catches on means getting in early, capturing more of the profits while others are still reacting to the broader market narrative.
Sector Performance in Bull vs. Bear Markets
Different sectors react differently to market phases:
- Technology: Thrives in bull markets but falters in bear markets if overvalued.
- Consumer Staples: More stable, often outperforming in bear markets.
- Financials: Volatile, relying on the economic environment.
- Healthcare: Usually more stable, providing essential services.
In bull markets, high-growth industries like technology and finance usually perform exceptionally well.
Investors feel optimistic and eagerly buy stocks, which pushes prices higher.
Sectors sensitive to economic growth, such as consumer discretionary and industrials, often see significant gains.
The positive sentiment and favorable economic conditions create an environment where companies thrive, leading to increased corporate earnings and higher stock prices.
As a result, investors enjoy substantial returns and feel confident about their investment choices. This cycle of optimism and growth fuels further investment, driving the market even higher.
Stock prices decline and investor sentiment turns negative in bear markets. Defensive sectors like utilities, consumer staples, and healthcare outperform others during these periods.
These sectors provide essential goods and services that people need regardless of economic conditions, making them more resilient during downturns.
Investors seek safety in these sectors to protect their portfolios from significant losses.
Basically, economic conditions influence sector performance.
- Expansion: Consumer discretionary and financials tend to outperform.
- Contraction: Defensive sectors like utilities, consumer staples, and healthcare often outperform.
Let me explain how sector rotation works
Sector rotation involves shifting investment focus to capitalize on economic cycles, that is, changing investments based on where the economy is headed. In early recovery, sectors like tech and industrials often do well. As the economy peaks, defensive sectors become safer bets.
how different sectors (like tech, healthcare, or energy) have performed over time in the stock market…
| Sector | How it behaves |
|---|---|
| Technology | Grows fast but is unpredictable |
| Consumer Staples | Reliable and strong in downturns |
| Healthcare | Stays strong no matter the economy |
| Financials | Easily affected by the economy |
| Industrials | Moves with the economy, depends on business spending and infrastructure |
…IN RELATION TO CHANGES IN THE INDEX
When companies are added or removed from the S&P 500, understanding sector performance can give you a lowkey strategic advantage in making more cash.
The inclusion of a company in the index often boosts its stock price due to increased demand from funds that track the S&P 500, but what’s less obvious is how the company’s sector might respond.
The 1% know to analyze whether the newly added company strengthens or weakens the performance of its sector.
If the sector is gaining weight in the index, it might be an early sign that institutional money is about to flow more heavily into that sector, creating profit opportunities for those who move early.
On the flip side, when a company is removed, it can signal that its sector is out of favor or that other companies in that sector may also face downward pressure.
By paying attention to sector shifts following an index rebalancing, you can anticipate where money will flow next.
The top investors might short stocks in a sector seeing removals or shift into sectors that are growing in representation within the index. It’s about spotting the ripple effect on sectors that the rest of the market overlooks.
Here are three strategies that tap into the mechanics of index changes, helping you make more cash in a way that most people don’t even think about.
1. Buy Companies Before They Get Added to the Index (S&P 500 Effect)
When a company gets added to the S&P 500, a huge influx of money pours into its stock. Why? Because funds that track the S&P 500—like index funds or ETFs—have to buy shares of that company to mirror the index exactly. This sudden demand for the stock usually pushes the price up.
The genius move here is to identify companies that are likely to be added to the index before the official announcement happens. Typically, these are companies growing fast, with a large market cap, and solid financials that might qualify them for inclusion. When a company gets added to the index, its stock price often jumps because of the demand from institutional investors, giving you a chance to sell at a higher price after the announcement hits.
Example Strategy: Keep an eye on news or financial analysts who talk about potential S&P 500 additions, and buy the stock early. When the announcement drops, the price usually spikes, and that’s when you can cash in by selling your shares.
2. Short Companies Before They Get Kicked Out (Deletion Blues)
Just like additions to the S&P 500 cause a price surge, being kicked out of the index (deletion) can lead to a price drop. When a company is removed from the index, all the funds and ETFs that track the S&P 500 have to sell off that stock, flooding the market with shares and driving the price down.
If you know a company is underperforming and likely to be removed from the index (because its market cap has shrunk or it’s struggling financially), you can short the stock before the official deletion announcement. Shorting means you profit as the stock price falls, which it almost always does once the removal is public and institutional selling begins.
Example Strategy: Identify struggling companies on the edge of being booted out of the S&P 500 (maybe their market cap dropped below a certain threshold), and take a short position. When the deletion news hits and the stock price tanks, you cash in.
3. Ride the “Rebalancing Ripple”
Index rebalancing happens quarterly, when the S&P 500 adjusts the weightings of companies in the index (based on their current market values). Sometimes, the weighting of certain companies gets significantly reduced or increased. When a company’s weighting goes up, index funds have to buy more of it to maintain the correct proportion in their portfolios. When the weighting goes down, they sell off shares.
Here’s the lowkey genius move: right before the rebalancing, find out which companies are getting an increased weighting and which ones are seeing a decrease. You can buy stocks that are about to be weighted higher (because there will be increased demand) and sell short those that are about to be weighted lower (since their stock will be sold off).
Example Strategy: Track rebalancing announcements and get in early. Buy stocks that are about to see an uptick in their weighting, and short those facing a reduction. As the funds make their adjustments, the stock prices will react, and you’ll profit from the moves.
Simple Breakdown:
- Pre-Index Addition Spike: Buy stocks that might be added to the S&P 500 before the announcement, then sell after the price jumps due to demand from index funds.
- Short Pre-Index Deletion: Short stocks of companies likely to be removed from the index. When the removal happens and funds sell off shares, you profit as the stock price falls.
- Play the Rebalancing Game: Buy companies that will see their weighting in the index increase (so funds will buy more), and short those seeing a decrease (so funds will sell).
These strategies take advantage of the predictable, mechanical changes that happen to the S&P 500—giving you the chance to profit by reading the market’s inevitable moves before they fully play out.
Relevance of understanding changes in the index in relation to sector performances in each strategy
Pre-Index Addition Spike
Knowing the sector performance matters because when a company is about to be added, it’s not just about the individual stock price increasing due to index fund demand.
The sector’s broader performance can amplify or temper that spike.
If the sector is already performing well, the addition of a company from that sector can create even more enthusiasm and lead to a bigger price jump.
If the sector is struggling, though, the gains from the addition might be muted.
Understanding sector momentum gives you insight into how strong the price surge might be and whether to hold longer or sell sooner.
Company Added, Sector Performance Poor
If a company is added while its sector is performing poorly, the addition spike could be more subdued. Investors might hesitate to push the stock price too high despite the index fund buying because of concerns about the sector’s struggles.
In this case, you’d want to monitor closely and be ready to sell earlier, before any excitement from the index addition fizzles out due to broader sector weakness.
The key here is to not expect the usual strong spike and consider locking in profits faster.
Lowkey genius strategies – Pre-Index Addition Spike: Company Added, Sector Performance Poor
In this scenario—where a company is added to the S&P 500 while its sector is underperforming—the lowkey genius move would be not just focusing on the immediate price spike but strategically using derivatives like options to amplify your profits with less risk exposure.
Instead of just buying the stock ahead of the addition, you could purchase call options with a short expiration (like a week or two) just before the announcement.
The idea here is to capture the brief surge in price while limiting your capital outlay. You profit from the spike without committing large sums, which is smart when the sector is weak, and you expect the run-up to be short-lived.
Another under-the-radar strategy is to hedge with puts on other companies in the same struggling sector. If the sector drags down the newly added company faster than anticipated, these puts could gain value, offsetting any losses from the addition spike fizzling out earlier than expected.
This way, you’re covering both sides of the trade—profiting from the index addition while being protected if the sector’s weakness reasserts itself.
Lastly, consider pair trading: buying the newly added company while simultaneously shorting another underperforming stock in the same sector. If the sector continues to struggle, the shorted stock will likely fall, while the added stock gets a temporary boost from index buying. This strategy minimizes your exposure to sector risk and still lets you capitalize on the index-related price movement.
Company Added, Sector Performance Strong: When a company is added to a sector that’s already doing well, the addition spike will likely be amplified. The strong sector performance could fuel more bullish sentiment, and the price could run higher for longer. This is the ideal scenario for riding the spike as far as possible, potentially holding through the initial buying wave and selling at the peak of momentum.
Lowkey Genius Strategy – Pre-Index Addition Spike: Company Added, Sector Performance Strong
In this scenario, where a company is added to the S&P 500 and the sector is already performing well, a lowkey genius strategy would be to go beyond just holding through the initial spike.
The idea here is leveraging momentum trading techniques while also capitalizing on the predictable index fund buying in a more creative way.
This is a breakdown of unconventional moves.
Buy Shares in Phases
Instead of front-loading your buy before the announcement, stagger your purchases as the momentum builds.
Since the sector is strong, you can confidently add to your position as the price rises. Most investors either load up too early or sell too soon.
By timing incremental buys during the rally, you take advantage of the sustained run that often follows an addition in a strong sector, maximizing gains across the run-up.
Sell Covered Calls During the Run
If you’re holding the stock after the addition, selling covered calls with slightly out-of-the-money strike prices allows you to lock in premium income while also benefiting from any further upside.
Since the stock is likely to rise thanks to sector strength, you can collect the premium and potentially sell at a higher price if the stock gets called away. If not, you still keep the premium and the stock.
Use a Leveraged Play with Call Spreads
This is where you get tactical. Buy in-the-money calls while simultaneously selling out-of-the-money calls for a lower net cost.
You’re betting on the stock rising but capping your upside with the sold calls.
The sector strength will likely provide sustained momentum, and this structure gives you higher leverage than just holding shares, amplifying your gains on the same capital outlay.
Monitor ETF Flow for Timing Exits
The genius move here is using the timing of ETF rebalancing that mirrors the S&P 500 to fine-tune your exit. Once the index addition is public, ETFs that track the S&P 500 will adjust their holdings.
Watching for large ETF purchases (which usually happen in the days immediately after the addition is official) can help you ride the full wave of momentum.
Once the ETF buying peaks, it’s a signal that the biggest buying surge is over, so you can sell right before other traders realize it’s time to lock in profits.
Look for Sector ETF Overload
A very niche but clever play is to keep an eye on sector-specific ETFs (like those tracking tech, healthcare, etc.). If this addition results in an overweight situation in those ETFs, it can create a rebalancing pressure on those funds in the near future. This would indicate an opportune moment to exit before that forced selling happens.
This strategy maximizes gains not just from the initial excitement but by recognizing the larger market mechanics that fuel the longer-term upward price movement in a strong sector. You’re playing on timing, sector momentum, and ETF flows to get every possible boost out of the move.
Short Pre-Index Deletion
When a company is likely to be removed, knowing how its sector is performing can add an extra layer of strategic insight. If the entire sector is underperforming, the short could be even more profitable because broader negative sentiment may pile onto the stock’s removal. Conversely, if the sector is strong but the individual company is lagging, you may need to be more precise with timing, since sector strength could partially offset the price drop.
Company Booted, Sector Performance Strong
If a company is removed while its sector is performing well, the short opportunity might be weaker. Strong sector sentiment could cushion the fall, as investors may see value in the stock despite its removal. Here, your timing needs to be more precise, potentially exiting the short position sooner to avoid missing a bounce from sector strength. You’d profit from the immediate selloff after the removal, but sector resilience could limit the depth of the decline.
Lowkey Genius Strategy – Short Pre-Index Deletion: Company Booted, Sector Performance Strong
In this scenario—where a company is removed from the S&P 500 but its sector is performing well—the lowkey genius move would be to get creative with pair trading and taking advantage of market psychology and short-term volatility.
Let me show you how you could make more cash.
- Pair Trade with Sector Leaders: Instead of only focusing on shorting the removed stock, consider shorting it while simultaneously going long on the top-performing companies in the same sector. The logic here is that when the sector is strong, the removed company might fall, but the leaders in the sector could benefit from capital rotation. Investors who sell the removed company may shift their money into the stronger players in the sector, pushing those stocks higher. You’re hedging by betting on the weaker company’s fall while riding the continued strength of the sector. This strategy makes money on both sides of the trade—one short, one long.
- Exploit Short Squeeze Potential: If the stock is heavily shorted because of its removal but the sector is strong, there’s a chance of a short squeeze if investors pile back in, thinking the stock was oversold. A lowkey genius move here is to take a contrarian long position after the initial selloff if you spot high short interest, betting on a squeeze as short sellers rush to cover once the stock stabilizes. This move plays off market psychology and sector resilience to catch others off guard.
- Trade the Post-Removal Bounce with Options: Another clever way to play this is by using short-term puts before the removal and then flipping to calls just after the stock bottoms out post-removal. Since the sector is strong, there’s a decent chance the stock might recover after the initial selloff. This strategy lets you profit from both the immediate drop and the potential rebound, amplifying returns using options with less capital at risk. You could, for instance, buy puts to capture the fall when the announcement hits, then buy calls or even buy the stock outright after the dust settles if you see it stabilizing.
- Use Sector-Driven ETFs to Hedge the Short: If you short the stock being removed but are worried about the sector cushioning the fall, a lowkey genius move is to hedge the short by going long on a sector ETF (like XLK for tech, XLF for financials, etc.). This way, if the sector strength keeps the stock from falling as much as you expect, your sector ETF long position compensates for the weaker short. You’re hedging your bet while still capitalizing on the initial drop from the company’s removal.
- Front-Run the Sector Rotation: If the sector is strong, you can assume some funds or institutional investors might shift capital from the removed stock into better-performing companies in that sector. The lowkey genius move here is to anticipate where that capital will go and position yourself ahead of time in the likely beneficiaries of that rotation. This isn’t just about shorting the removed company but also about buying stocks in the same sector that are likely to benefit from the outflow of money.
In all these strategies, you’re working the angles beyond the textbook “short-the-stock” move, leveraging sector strength to either hedge, squeeze extra gains from volatility, or even profit on both sides of the market.
Company Booted, Sector Performance Poor
If a company is removed from the index while its sector is struggling, this is a prime shorting opportunity.
Sector weakness will likely compound the effect of the removal, leading to a steeper and more sustained price drop.
Investors might lose faith in both the company and the broader sector, leading to a sharp and prolonged decline.
You can hold the short position longer here, riding the continued downward pressure from both the index deletion and sector-wide negativity.
Play the Rebalancing Game
Sector performance is crucial here, as rebalancing isn’t just about changes in the index but how those changes interact with broader sector trends.
If a company’s weighting is increasing and its sector is strong, the fund buying will likely push the stock higher with even more intensity.
On the other hand, if a company’s weighting is decreasing and its sector is weak, shorting it becomes more attractive since sector-wide selling pressure could compound the drop from the rebalancing.
Understanding sector flows ensures you’re not just reacting to index changes but leveraging the broader market context to time your moves better.
Weight Increase, Sector Performance Poor
If a company’s weighting in the index increases while its sector is underperforming, you can still expect some buying pressure from index funds, but broader market skepticism about the sector might limit the upside.
In this case, it’s a cautious buy—you’d expect some gains, but not as explosive as when the sector is strong.
You’d also want to be nimble and exit quickly if sector negativity drags the stock back down after the initial rebalancing.
Weight Increase, Sector Performance Strong
A company seeing its index weighting increased while its sector is thriving is a golden opportunity.
The increased buying from funds, combined with the sector’s strong performance, can create a substantial and sustained upward movement.
Here, you could ride the wave longer, confident that the stock’s rise has solid sector backing.
Weight Decrease, Sector Performance Strong
Shorting a company seeing its weight reduced while the sector is doing well is trickier.
Strong sector performance might cushion the impact of the rebalancing, as the market may still see the stock as valuable despite the index fund selling.
In this scenario, the short would be more short-term; you’d want to profit from the immediate dip after the rebalancing but exit quickly to avoid getting caught by a sector-driven rebound.
Weight Decrease, Sector Performance Poor
If a company’s weighting decreases and the sector is underperforming, the short is much more attractive.
Sector weakness will likely amplify the selling pressure as the rebalancing causes index funds to sell off the stock.
Investors already skeptical of the sector will likely pile on, pushing the stock price down further. This scenario allows for a more extended short position, as the decline will likely be more significant and prolonged.
How understanding market behavior can help you make more cash
Understanding market behavior helps you make more cash because it’s not just about knowing when to invest—it’s about knowing how people react to money.
The secret that only the top 1% really get is that the market isn’t just driven by logic, stats, or facts; it’s driven by human emotions—fear, greed, and everything in between.
Expansion Phase
- Strong economic growth
- Bullish trends in S&P 500
- Technology, consumer discretionary, and industrials flourish
Peak Phase
- Growth plateaus
- Market gains may continue, but risk of downturn increases
- Technology and financials may still perform well
Contraction Phase
- Growth decelerates
- Bearish trend in S&P 500
- Defensive sectors like consumer staples and utilities fare better
Trough Phase
- Economy hits bottom before recovery
- Opportunities for value investing
What only a fraction of people get: it’s not just about reading emotions, it’s about understanding time differently.
The biggest edge you can have in the market isn’t predicting what will happen, but predicting when it’ll happen by recognizing cycles and patterns that repeat over decades.
See, the market moves in rhythms—like seasons.
The real pros know that every crash, boom, or correction is part of a larger, predictable cycle that has nothing to do with just a single event or emotion.
These patterns are hidden in plain sight, but they stretch over years, even decades.
It’s why the top 1% aren’t fazed by day-to-day volatility—they know they’re playing a long-term game where timing the market’s macro cycles is far more powerful than reacting to the micro-movements everyone else focuses on.
In other words, while everyone else is looking at short-term trends and jumping in and out of stocks based on headlines or market buzz, the most successful investors are positioning themselves years in advance, anticipating inevitable shifts based on historical cycles.
- Expansion: Growth-oriented and cyclical sectors thrive
- Peak: Defensive sectors gain attention
- Contraction: Defensive sectors outperform
- Trough: Opportunity to enter long-term positions in growth sectors
Effective navigation through economic cycles requires insight and a diversified investment strategy.
Recognizing when to pivot between defensive and growth sectors, leveraging the timing of economic phases, and maintaining a long-term perspective can guide investors in achieving consistent returns from the S&P 500, regardless of market conditions.
Effects of rising or falling prices
Inflation and deflation significantly influence the real value of investment returns in the S&P 500. Their effects extend beyond percentages and alter investment outcomes substantially.
Inflation can diminish purchasing power over time.
If your portfolio returns 10% annually with 3% inflation, your real return is 7%.
This reduction has long-term implications, especially for fixed-income investments like bonds. For example, a bond with a 4% yield in a 3% inflation environment provides only a 1% real yield.
This impact is more significant for investors relying on fixed income for retirement, highlighting the need for inflation-protected securities or diversified portfolios including equities.
Equity markets, including the S&P 500, generally offer better protection against inflation compared to fixed-income securities.
Companies often transfer increased costs to consumers, helping maintain profit margins. Sectors like consumer staples and technology have shown resilience during inflationary periods.
However, high inflation can also increase borrowing costs and pressure company valuations, potentially limiting growth in some segments.
Real estate investment trusts (REITs) within the S&P 500 also offer some protection against inflation, as property values and rental incomes tend to rise with inflation, maintaining their investment appeal.
As the costs of construction materials and labor increase, the value of existing properties also goes up, boosting the asset values held by REITs.
Additionally, many commercial leases include escalation clauses tied to inflation indices, allowing REITs to increase rents periodically.
This ensures that their income stream grows in line with inflation, providing a steady and rising dividend payout to investors, which helps preserve purchasing power.
Deflation can have a different impact.
While lower prices might sound good, deflation can hurt the economy by reducing consumer spending and business profits.
This can lead to lower stock prices and more conservative investment behavior. In such periods, cash and bonds might perform better than equities, but investors need to be cautious about the overall economic health.
Investment Strategies for Inflation and Deflation
Investors need to adjust their strategies to manage the effects of both inflation and deflation effectively.
During Inflation:
- Equities Over Bonds: Stocks generally perform better than bonds during inflationary periods as companies can pass higher costs to consumers.
- Real Assets: Investing in real assets like real estate or commodities can provide a hedge against inflation.
- Inflation-Protected Securities: Consider Treasury Inflation-Protected Securities (TIPS) that adjust with inflation.
During Deflation:
- High-Quality Bonds: Government bonds or high-quality corporate bonds may offer better security during deflation.
- Cash: Holding cash can be beneficial as its value increases in deflationary environments.
- Dividend Stocks: Companies with a strong history of paying dividends can provide a steady income stream when stock prices are under pressure.
Market volatility can be unsettling, but it’s part of the investment landscape. Managing this volatility is crucial for maintaining a healthy portfolio.
Panic can lead to poor decision-making. Having a clear, long-term strategy helps ride out short-term market fluctuations. Remember, markets tend to recover over time.
Spreading investments across various sectors, asset classes, and geographical regions can reduce risk. Diversification helps mitigate the impact of a downturn in any single area.
Regularly reviewing and rebalancing your portfolio ensures it stays aligned with your investment goals and risk tolerance. It also helps take advantage of growth opportunities and avoid excessive risks.
Historical trends in the S&P 500 offer valuable lessons. While past performance doesn’t predict future results, understanding how markets have reacted to similar conditions can provide guidance.
Important Historical Insights
- Post-Crisis Recoveries: Markets often experience strong recoveries following significant downturns. The 2008 Financial Crisis recovery is a prime example.
- Sector Leadership Changes: Different sectors lead the market during different phases. For instance, tech and healthcare often lead during recoveries, while consumer staples and utilities perform better during downturns.
- Long-Term Growth: Despite short-term volatility, the S&P 500 has shown long-term growth, making it a solid choice for long-term investors.
To predict market changes, the key indicators you should watch for are like signals, but here’s the thing—what most people look at (like interest rates, inflation, or job reports) is only the surface-level stuff. What the top-tier investors are really watching are the underlying shifts that drive these numbers.
Want some next-level insight? Watch the liquidity.
Liquidity is the single most important and least understood indicator.
Liquidity is basically how much money is flowing through the system—how easy it is to borrow, spend, and invest.
When liquidity is high, money is cheap, easy to access, and everyone’s throwing it around. That’s when markets are bubbly and overinflated.
But when liquidity starts drying up—when central banks are tightening money supply or interest rates rise—it’s like the oxygen leaving the room. That’s when markets start to stumble, long before most people even notice.
Most investors focus on price, but the real pros are tracking liquidity conditions, because it tells them how much fuel is left in the system.
You’ve watched the gas gauge on a long road trip before, right?—if the money supply is running low, the market is going to slow down no matter how optimistic everyone seems.
Another indicator that separates the sharp from the average is credit spreads—basically, how much extra interest riskier companies have to pay to borrow money compared to safer ones.
When that gap starts widening, it means investors are getting nervous about the economy and are pulling back on lending. That’s your early warning system for a potential downturn.
It’s like the market is flashing yellow lights, but most people are still zooming ahead.
So, instead of just watching prices move up or down, keep an eye on how much cash is actually available to fuel growth and whether credit markets are tightening up.
If you can read those signals, you’ll be ahead of the game while everyone else is just reacting to the headlines.
3 CLEVER STRATEGIES TO MAKE MORE CASH FROM HOW INTEREST RATES AFFECTS S&P 500 MOVEMENTS
Understanding how interest rates influence the market gives you a huge edge because the moves aren’t just immediate reactions; they ripple through different sectors and create predictable patterns.
Below are three lowkey genius strategies you can use to make more cash by timing the market with interest rate changes.
These strategies are about timing your investments with rate changes—not just reacting, but anticipating where the money will flow based on how interest rates affect different sectors.
By rotating through sectors intelligently, you can capture gains in the S&P 500 when the broader market might be distracted by the noise around interest rates.
1. Rotate Into Tech Stocks When Rates Are Low (Tech Loves Cheap Money)
When interest rates are low, borrowing money becomes cheaper for companies.
This is especially important for growth stocks like those in the tech sector, where companies often rely on cheap capital to fund expansion, R&D, and innovation.
Low interest rates mean lower financing costs, which boosts profits, and investors flock to these high-growth companies because they’re seen as more valuable in a low-rate environment.
The genius move here is to rotate your investments into tech-heavy sectors—think Apple, Microsoft, Google, etc.—when interest rates are staying low or dropping.
Tech stocks tend to outperform the broader market in low-rate environments because investors feel more comfortable with riskier, high-growth companies.
Example Strategy: Watch for announcements from the Federal Reserve or other indicators that interest rates will stay low.
Load up on tech or high-growth stocks in the S&P 500, and ride the wave of investor enthusiasm. As these stocks climb, you can cash in on their boosted performance.
2. Shift Into Financials When Rates Are Rising (Banks Thrive on Rate Hikes)
Higher interest rates aren’t all doom and gloom—they can be great news for certain sectors, especially financials like banks and insurance companies.
When interest rates rise, banks can charge more for loans and make more money from the spread between what they pay on deposits and what they earn from lending.
This is called the net interest margin, and it grows when rates go up. Financial stocks in the S&P 500 (like JPMorgan or Bank of America) tend to outperform in these conditions because higher rates mean higher profits for them.
Here’s where you get smart: when you see that interest rates are rising, or there’s an expectation that the Fed will continue hiking rates, rotate your investments into financial stocks.
These stocks often climb as investors anticipate better earnings from these companies.
Example Strategy: Keep an eye on interest rate forecasts or Fed meetings.
When you spot a rising rate trend, move into financial stocks within the S&P 500, and let the rate hikes work in your favor as these companies start reporting stronger profits.
3. Capitalize on Rate Changes by Timing Dividend Stocks (The Dividend Shuffle)
Interest rate changes also mess with investor preferences for dividend-paying stocks versus bonds.
When rates are low, investors chase dividend-paying stocks because they offer a better return than the near-zero interest on bonds.
But when interest rates rise, bonds become more attractive because they offer safer, steady returns, and investors shift their money out of dividend stocks and into bonds.
This move can cause dividend stock prices to fall as demand drops.
Here’s the genius play: when interest rates are low, move into dividend-heavy sectors like utilities or consumer staples (think Procter & Gamble, Johnson & Johnson).
These stocks provide steady income through dividends, and when rates are low, they’re in high demand.
But as rates start to climb, rotate out of these dividend stocks before other investors dump them in favor of bonds.
You’ll avoid the price drop and can potentially shift your money into sectors that benefit from higher rates, like financials.
Example Strategy: Buy dividend-paying stocks when rates are low, as they’ll offer attractive returns compared to bonds.
But when you see rates starting to rise, exit those positions before the big money shifts out and stock prices fall. Use that cash to get into rate-friendly sectors like financials or industrials.
Simple Breakdown:
- Tech Stocks in a Low-Rate World: Move into tech and high-growth sectors when rates are low, as these companies thrive on cheap borrowing costs and tend to outperform.
- Financials During Rate Hikes: Shift into banks and financials when interest rates are rising, as their profits from lending increase, boosting stock prices.
- Dividend Stock Timing: Load up on dividend-paying stocks when rates are low, but exit them when rates start rising to avoid price drops as investors shift into bonds.
