What Investors Should Expect This Black Friday

Plus, some relevant retail stocks to watch

Senior Quantitative Analyst
Nov 22, 2023 at 8:00 AM
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As we move through Thanksgiving week, the spotlight shifts to Black Friday, or the unofficial beginning of the holiday-shopping season. In the coming week, analyses of Black Friday sales, foot traffic trends, and, inevitably, some Walmart (WMT) scuffles will all serve as key metrics to assess consumer strength and gauges for the broader economy. For investors, this week serves as an enlightening period for stock observation.

This week, the historical performance of stocks in the aftermath of Black Friday piqued my interest. I'll delve into whether this post-Thanksgiving period proves to be a reliable indicator for stocks, exploring its potential impact on future market trends. Additionally, I'll list some retailers, as well as other pertinent stocks and how they have performed during the pivotal week following Black Friday.

The Week After Black Friday

The first table below summarizes the S&P 500 Index (SPX) performance in the week after Black Friday. It's been bullish since 1990, averaging a 0.65% gain for the week compared to a 0.17% average gain for all other weeks. What's more, the percentage of returns that have were positive is higher than typical weeks (67% vs. 56%). I thought there might be higher standard deviation during the week because of reactions to the retail shopping data, but that has not been the case.

SPX Weekly SInce 90

The week after Thanksgiving was especially bullish more recently. In 13 Black Fridays since 2010, the following week averaged a gain of 1.42%, with 77% of the returns positive. The typical week returned 0.22%, with 58% positive. Since 2010, there was a slightly higher standard deviation than the market.

SPX Since 10

Black Friday Week Indicator

If insights into the market can be gleaned from Black Friday reports, perhaps they hold clues about where stocks go from here. The table below shows how the SPX performed over the next three months, depending on how the index did the week after Black Friday. This proves to be an excellent indicator at predicting the next three months. When the SPX gained 1% or more the week after Black Friday, the next three months averaged a return of 3.9% with 77% of the returns positive. When the next week was down by 1% or more, the index lost an average of 4.1%, with just 33% of the returns positive.

SPX 3 Months

The indicator fails when you shorten the time frame, however. The table below shows the results for just the rest of the year. The last few weeks of the year were historically bullish, and you get average returns that were positive and a high percent positive in any circumstance. This might be due to other factors at work over the last few weeks of the year (tax reasons, end-of-year portfolio adjusting, etc.), then the indicator can play out after that.

SPX RoY

Notable Stocks Next Week

Finally, below are some SPX retailers and other stocks that are relevant for the holiday-shopping season. The table summarizes how the stocks performed in the week after Black Friday over the past 10 years. Nike (NKE) and HP (HPQ) top the list, being positive eight of the past 10 years. Notably, the grandaddy of retailers -- or should we say e-tailers? -- Amazon.com (AMZN) is at the bottom of the list, averaging a loss of 1% during the week, with just positive returns over the last decade.

Notable SPX Stocks After Black Friday

 

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