How Thanksgiving and Black Friday Affect Stocks

The name Black Friday is given to the day after Thanksgiving in the U.S., a retail and spending event. Sales on Black Friday can shed light on investor confidence and consumer spending trends.

When consumer spending on Black Friday?is high,?investors have their first indication of a profitable shopping season. Stock prices for retailers may reflect this trend. Conversely, if retailers do not meet expectations on Black Friday, consumers may be reining in their spending, and the stock market may react accordingly.?

Key Takeaways

  • Black Friday is the name given to the day after Thanksgiving when retailers rely on major sales to bring in crowds of buyers.
  • Sales during the five days of Thanksgiving through Cyber Monday reflect consumer sentiment for the holiday season.
  • Strong sales during this period can benefit retail sector stocks.

Post-Thanksgiving Shopping

Retailers rely on strong Black Friday sales to earn a profit for the year, commonly offering major sales and doorbuster deals on overstock inventory, seasonal items, big-ticket items, and holiday decorations and gifts.

In 2022, almost 197 million people shopped in stores or online from Thanksgiving through Cyber Monday, according to the?National Retail Federation, spending an average of $325.44 each over the five days. Top gift purchases included clothing and accessories, toys, gift cards, books, video games, food and candy, and electronics.

Thanksgiving Shoppers
Source: NRF.

In 2023, holiday spending is expected to reach record levels during November and December, growing 3% to 4% over 2022 and from $957.3 billion to $966.6 billion. Nearly half (46%) of consumers reported that they started their holiday shopping before November 2022, and that trend is expected to increase in 2023.

Holiday Forecast Shopping
Source: NRF.

Cyber Monday

The Monday after Thanksgiving is called Cyber Monday, when consumers return to work but shop online. It marks the end of the five-day Thanksgiving weekend shopping period.

Holiday Retail Trends

Thanksgiving has proven an important day for those in the food industry, and Black Friday is a strong day for retailers. The U.S. stock markets, however, are closed on Thanksgiving and have shortened hours on Black Friday.

Investors look at Black Friday sales numbers to gauge the retail sector. Economists with Keynesian assumptions that spending drives economic activity may view lower Black Friday numbers as indicating slowed growth. Markets tend to see increased trading activity and higher returns the day before a holiday or a long weekend, a phenomenon known as the holiday or weekend effect.

According to a 2023 Deloitte holiday survey, consumers are expected to spend an average of $1,652 during this holiday season, surpassing 2019 pre-pandemic figures.

Stock Market Performance

From 2001 through 2022, the S&P 500's overall performance around the Thanksgiving holiday has been mixed, seeing positive returns just half the time. Over that time, the S&P had more than 1% gains on just three Black Fridays—in 2001, 2007, and 2012—but fell as much as 1.7% in 2009.

The U.S. sector that thrives from the week before Black Friday to the week after is retail. Over the past 10 years, the retail sector has generally outperformed the S&P 500 during that period. Investors may follow the trends in retail sector funds and stocks like SPDR S&P Retail ETF (XRT)Amazon (AMZN), or Walmart (WMT) as the shopping season begins. 

Why Is It Called Black Friday?

Black Friday got its name in Philadelphia in the 1960s. An annual Army-Navy football game would bring in tons of tourists, who were also on hand to descend on shops the day after Thanksgiving. The police took to calling the long work day of traffic, crowds, and bad weather “Black Friday.” Retailers tried over time to get consumers to use “Big Friday,” but it did not stick. Eventually, and no doubt helped by customers who experienced the crowds and long lines for sales, retailers took the name as their own, saying Black Friday refers to how the holiday season pushes retailers into the “black,” meaning positive profitability, for the year.

When Did Black Friday Sales Begin?

Thanksgiving holiday sales were coordinated under “Black Friday” in the 1960s. Black Friday began in Philadelphia when tourists would descend on the city on the day between Thanksgiving and the annual Army-Navy football game held on Saturday. After the game, shops and department stores offered major holiday sales, drawing major crowds.

What Is Cyber Monday?

Cyber Monday takes place on the Monday following the Thanksgiving weekend. Online retailers offer sales, and traditional retailers offer website-only deals.

The Bottom Line

Consumer spending around the Black Friday period following Thanksgiving can be a boon to retailers and indicates consumer sentiment to economists and investors. Over the Black Friday through Cyber Monday period, retail stocks see a bump in sales, and analysts gauge how big the increased spending is and what it means for the wider economic outlook.

Article Sources
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  1. National Retail Federation. "Record 196.7 Million Consumers Shop Over Thanksgiving Holiday Weekend."

  2. National Retail Federation. "2023 Holiday to Reach Record Spending Levels."

  3. National Retail Federation. "2023 Holiday Shopping Outlook."

  4. Nasdaq. "2023 Stock Market Holiday Schedule."

  5. New York Stock Exchange. “Holidays & Trading Hours.”

  6. Deloitte. "2023 Deloitte Holiday Retail Survey."

  7. Yahoo! Finance. “S&P 500: Historical Data.”

  8. Yahoo! Finance. “How Stock Tend to Perform After Black Friday.”

  9. The New York Times. "How Black Friday Got Its Name."

  10. History Channel. “A Visual History of Black Friday: From Financial Crash to Shopping Mania.”

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