The very first day following Thanksgiving is known as Black Friday. It’s among the country’s major shopping and spending occasions. Pundits make forecasts regarding the number of purchases on Black Friday every holiday shopping season, and whether or not those projections are realized or surpassed might influence investor sentiment. Assuming customers end up spending much on Black Friday after Thanksgiving and businesses report excellent numbers, investors will see their first sign that the holiday shopping season is looking like it’s going to be a very rewarding one. The optimism is seen in the share prices of retailers who have had a good year. When retailers fail to fulfill predictions on Black Friday, though, many people see it as a warning of doom.
According to the National Retail Federation (NRF), an estimated 186.4 million individuals shopped in retail locations and online from Thanksgiving to Cyber Monday in 2020. From the report, these shoppers spent an average of $311.75 during the five days, down 13.9 percent from $361.90 in 2019. Well over 100 million consumers shopped online for the first time, bringing the total number of online-only shoppers to 95.7 million.
How Black Friday Weekend Impacts Stock Market
For many businesses, especially those in the food market, Thanksgiving is a significant date. Nevertheless, on Thanksgiving Day, the financial markets in the United States are shut, and on Black Friday, they are only active for half of the day. World markets remain open, but, due to the importance of the day following Thanksgiving, stock market activity is unaffected.
Black Friday is significant as it is the time when several retailers have historically earned sufficient sales to end the year in profit. Investors use Black Friday sales statistics to estimate the total strength of the retail market as most shops regard Black Friday to be vital to their yearly review. Analysts see reduced Black Friday figures as a sign of falling demand, based on the Keynesian idea that spending stimulates economic growth.
Taking days off for Thanksgiving or Christmas can have an impact on the stock market. The holiday effect is a phenomenon in which markets witness increased trading activity and better yields the day preceding a holiday or a long weekend. Several investors seek to profit from seasonal influences.
A lot of financial analysts dismiss the idea that Black Friday possesses any meaningful predictive value for the final quarter of the year or the stock market in general. Rather, they contend that it only has a very brief impact.
Retail is the strongest sector in the United States from the preceding week to a week after Black Friday. Between 2007 to 2017, a grouping of S&P 500 retail stocks returned 5%, opposed to the S&P 500’s average return of 3% for the same time frame. Again for the past ten years, this retail stock group has traded in the black for the 10 days. During the same month in 2018 and 2019, the S&P 500 Retailing Industry Group outperformed the S&P 500 by 1.5 percent and 0.1 percent, correspondingly. The S&P 500 gained 4.1 percent in 2020, however, the retailing industry group only gained 2.2 percent.