1 Even before Thanksgiving arrives, many Americans are already strategizing their purchases and hoping to snag the best deals the following day — on Black Friday. This day is renowned for significant profits for companies and massive shopping sprees worldwide. Additionally, Black Friday is a crucial event for the economy, stock market, and investors, as sales results on this day allow for forecasting future trends. Investment expert Yevhen Pylypets discussed what trading style will be advantageous on this day—whether speculation or a long-term strategy. According to reports from Kontrakty.UA.
2
Why is Friday called "Black"?
This Friday earned its name in Philadelphia during the 1960s. The annual football game between the Army and Navy attracted numerous tourists who were also eager to shop after Thanksgiving. The police began referring to the long working day filled with traffic jams, crowds, and bad weather as "Black Friday." Over time, retailers attempted to encourage consumers to use the term "Big Friday," but it never caught on.
Thanks to customers who experienced the crowds and long lines during the sales, retailers adopted this name as their own. They claimed that Black Friday refers to how the holiday season pushes retailers into the "black," meaning positive profitability, throughout the year.
How does the stock market behave during this period?
Thanksgiving is significant for the food industry, while Black Friday is crucial for retailers. However, U.S. stock markets are closed on Thanksgiving Day and operate on a shortened schedule (until 1 PM Eastern Time) on Black Friday.
Investors look at sales on Black Friday to gauge the retail sector. Economists with Keynesian assumptions that spending stimulates economic activity may view lower figures on sale day as an indicator of slowing growth. Markets typically exhibit increased trading activity and higher profitability in the lead-up to holidays or long weekends, a phenomenon known as the holiday/weekend effect.
S&P 500 Index Dynamics After Black Friday
Since 1991, the S&P 500 index has been bullish, with an average gain of 0.63% for the week compared to a 0.17% gain in the weeks following Black Friday. Additionally, the index was positive 66% of the time.
3
Looking at individual days, the Monday after Black Friday tends to be a poor day for stocks, with an average loss of 0.23% and a 41% positive return. Wednesday, and especially Friday, have been days that helped the following week turn out historically bullish. The Friday of the following week had an average gain of 0.58% with a 78% positive return.
Black Friday reports can reveal much about the economy and potential stock market directions. Historical data shows that the S&P 500 index often follows the trend of the week immediately after the sale day over the next three months.
If the S&P 500 index rises by 1% or more in the week after Black Friday, the average return for the next three months is 3.9%, with over 80% of cases being positive. However, if the index declines by 1% or more during that week, the average return over the next three months drops to -4.6%, with only 33% of results being positive.
4
Stock Performance in the Week Following Black Friday
HP and Nike top the list, as their results have been positive in 8 out of the last 10 years. Interestingly, Amazon.com is at the bottom of the list, with an average loss of 0.6% over the week. Its positive results occurred in only 2 out of the last 10 years.
How stocks performed in the week after Black Friday over the last 10 years
5
What is more advantageous to buy?
According to historical data, long-term stock purchases in one's portfolio make sense when the S&P 500 index rises by 1% in the week after Black Friday. The average return for this strategy is 3.88%, with a positive outcome rate of 81.8%.
Avoiding long-term stock purchases is advisable if the S&P 500 index drops by 1% in the week following Black Friday. The average yield over three months is -4.58%.
Among individual stocks, especially HP and CVS Health, which have average yields of 2.47% and 2.85% in the week after Black Friday, with positive outcome rates of 80% and 70%, respectively. Amazon's stocks showed the worst performance among those listed, with -0.6% and only 20% positive results.
As speculation, stocks that showed the highest profitability in the week following Black Friday can be considered. Based on the week's closing results, long-term plans can be made, whether to refrain from purchasing stocks or to add them to a portfolio based on the first week's positive outcome.