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It was first known for the Black Friday stock market crash and then for being the biggest shopping day of the year. The meaning may have changed, but today Black Friday is still under market surveillance. Which retailers should benefit? What can we learn from the price action of years past? And what factors help you trade the period? We will find out. But first, a history lesson.

What is Black Friday?

Black Friday was originally the term used to describe the stock market collapse of 1869, when US investors Jay Gould and James Fisk caused a financial collapse after an unsuccessful attempt to corner the gold Marlet.

The modern concept of Black Friday, however, emerged in the 1940s to draw people into stores the day after Thanksgiving. Named for its tendency to contribute to traffic accidents, Black Friday later took on new meaning as businesses expected to make enough sales to put them “in the dark”, or profitable, for the year.

It wasn’t until the 1980s, however, that retailers slowly began to use the day as a marketing tool, culminating in its widespread status as the most popular shopping day of the year in the 2000s. hui, Black Friday is much more than just an American tradition; it has spread to around 20 other countries, including Mexico, Russia and Pakistan.

Along with Cyber ​​Monday, the Monday after Thanksgiving which boosts online sales, the buying period is viewed by some analysts and market commentators as a measure of economic prosperity. This metric can then be used to predict the performance of other assets such as stocks.

The influence of Black Friday

Marketing gimmick or useful indicator; what is the global influence of Black Friday? To answer, it’s worth considering its effect on retail spending and consumers, the economy, and the resulting effect (if any) on traders and stocks.

1) Retail and consumer spending

There is no doubt that Black Friday influences consumer spending. In various countries, the event is touted as a rare opportunity to save money on a range of products from laptops to lawn mowers, and historic media coverage of the event has featured scrambles in the dots. retail as bargain-hungry punters battle for business. In 2018, data from Adobe Analytics shows that $ 6.22 billion was spent online in the United States, an increase of 23.6% from the previous year. Additionally, each Black Friday bar had a higher retail sales volume than any other date.

2) Economy

The influence of Black Friday on the economy is more questionable. Some argue for the Keynesian effect of spending that stimulates economic activity, which puts more money into circulation and potentially energizes the economy. At a time when the US economy is showing signs of recession, consumer spending could be welcome. But others say the influence of the event is negligible, with only short-term effects observed. This is in part due to lessons from previous years, when many retailers saw poor sales figures after the discounts ended.

However, if stores decide to go another route and extend discounts, profit margins can be eroded, potentially meaning staff cuts and increased unemployment. Ripple economic effects could include reduced tax revenues and an increased welfare burden, factors that argue in favor of a Black Friday having a net negative economic effect.

3) Stocks / stock markets

The influence of Black Friday on stock markets and individual stocks is also far from straightforward. Perhaps predictably, a range of retail stocks can increase if sales expectations are met. Conversely, surprisingly weak sales can suggest poor consumer confidence and a fragile underlying economy, giving traders a reason to sell short. But even if a given company has had strong sales, that performance has no bearing on its profitability or overall financial health, factors traders should consider when choosing one stock over another.

Examining the impact of previous Black Fridays on financial markets provides insight into trends traders might expect to see after this key date in the future.

Black Friday and stock market history

As the Black Friday story begins with the catastrophic stock market crash of 1869, the modern iteration of Black Friday has seen retail stocks perform solidly around the Black Friday period. This can be observed in the S&P 500 where, over a ten-year period, Bloomberg data shows a 5% return for retail stocks, compared to an average of 3% over a period of a week before Black Friday to a week after.

The Black Friday 2014-2018 periods are circled on the S&P 500 chart below. However, while this data suggests that retail stocks perform well over this time frame, stock pickers need to be aware of the nuances between retail subsectors as well as the likelihood of sales in retail. line benefit from stocks that are more reliant on brick and mortar, as well as additional fundamentals that can move the market.

Black Friday Retail Stock Performance: An Overview

When measuring the performance of retail stocks on Black Friday, here is an overview of how the top 15 global retail stocks were performing in 2018 over the period of one week before to one week after Black Friday:

Closing price: November 16, 2018 ($) Closing price: November 30, 2018 ($) Percent increase / decrease
Amazon 1502.06 1,690.17 +11
Apple 193.53 178.58 -8
Best buy 66.43 64.59 -3
Burlington Stores 161.75 165.76 +2
Costco 231.02 231.28 +0
CVS 79.33 80.20 +0
H&M 3.49 3.63 +4
Home deposit 177.02 180.32 +2
Lowe’s 93.25 94.37 +1
Sainsbury’s 15.90 15.60 -2
Target 79.68 70.96 -12
Tesco 7.82 7.51 -4
TJX 51.49 48.85 -5
Walgreens 82.52 84.67 +3
Walmart 97.69 97.65 -0

Amazon reaped the rewards in 2018, enjoying its biggest shopping day in history on Cyber ​​Monday. Customers ordered more than 18 million toys and 13 million fashion items on Black Friday and Cyber ​​Monday combined, according to Bloomberg data, and saw its stock price rise 11% on the two-week period from November 16 to 30. as the table shows.

On the short side, while Target stocks were down 12% over the same time frame, the drop can likely be attributed more to a wider stock market decline caused by trade wars and concerns about global growth. than any other factor. This highlights the importance for traders to consider a range of fundamental reasons that can contribute to movements during the holiday season.

Key Considerations When Trading Stocks on Black Friday

Once traders assess the market and realize that traders are taking the lead in Black Friday sales, there are a variety of other considerations to take into account when trading stocks around this time. .

  1. Stock market liquidity: Trading during the holidays can seriously distort liquidity and Black Friday is no exception. With fewer traders on the desk, liquidity dries up and the potential for larger swings can increase, especially as stop losses are triggered automatically and positions are abandoned.
  2. Fundamental factors: These can give clues as to how consumer spending may evolve, allowing traders to consider certain retail stocks. For example, lower gasoline prices and high employment figures could indicate increased purchasing power and the company’s sales expectations being met. However, as mentioned above, it is important to be aware of a whole range of other factors that can impact the market and overshadow any movement caused by consumer sentiment.
  3. Online vs physical sales: Brick-and-mortar retailers have lost ground to their online competition in recent years and Cyber ​​Monday threatens to take the crown in terms of total sales. To capitalize on this, it can be helpful to keep an eye out for stocks like Amazon and Best Buy that have compelling online shopping deals during the holidays.
  4. Income is usually not released until January: Traders should also keep in mind that company performance may not be entirely clear until results, which for many companies will be released in January.

What time does the stock market close on Black Friday?

The stock market open on Black Friday is at 9:30 a.m. ET as usual, but the market closes at 1:00 p.m. The market is closed for all of Thanksgiving.

Further reading on stocks and major stock market indices

If you want to learn more about stocks, improve your knowledge about stocks with our helpful articles.

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