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How Do The Black Friday and Cyber Monday Impact Financial Markets?


22 November 2022

Black Friday and Cyber Monday are two of the most highly anticipated days of the year for consumers, with businesses slashing prices and promoting attractive deals on what is essentially the busiest shopping weekend of the year. Black Friday refers to the Friday following Thanksgiving in the USA and is generally when a majority of consumers will purchase presents and gifts for Christmas. These holiday deals tend to carry through the entire weekend until Monday, which is now famously referred to as Cyber Monday for online retailers. 

Given that consumer spending accounts for just shy of 70% of US GDP, Black Friday and Cyber Monday sales can provide investors with insight into the health of the world’s largest economy. Indeed, Black Friday sales numbers are often used as a way to gauge the overall state of the entire retail industry. 

However, some industry experts believe that this is too small a sample size to give a clear picture of how an industry or company is performing. Nevertheless, throughout this article we will look at the different ways Black Friday and Cyber Monday can impact financial markets in general. 

Black Friday Sales and Retail Stocks

Unsurprisingly, the biggest beneficiaries of both Black Friday and Cyber Monday sales are consumer discretionary stocks; that is companies in the retail sector. Since 2007, the top performing stocks in the US from the week before Thanksgiving to the week after are retailers, returning an average of 5% during that time frame. This is far more impressive than the 3.5% return that companies outside of the retail sector average during the same two-week timespan. 

However, this relationship seems to have come undone in recent years, with retail firms underperforming other major sectors in the US S&P 500 in the days after Black Friday and Cyber Monday in 2019, 2020 and 2021. A major driver of this sell-off in the aftermath of the holiday weekend sales could be that investors’ sales expectations exceeded the actual numbers recorded throughout the period.

S&P Consumer Discretionary Index Fell in 2019, 2020 and 2021 after Black Friday 

The Weekend Effect

Another reason behind the underperformance seen in retail-centric stocks during the past three Black Friday periods could be the so-called “Weekend Effect”.  The “Weekend Effect” is a phenomenon seen consistently in global financial markets in which stock returns on Monday are often significantly lower than those of the immediately preceding Friday. It must be said that this dynamic in financial markets is heavily debated amongst market participants, with several theories behind why it occurs. 

The one that may prove most relevant to Black Friday is that investors won’t know the final sales figures until the weekend, meaning they won’t be able to price in the results until Cyber Monday. With that in mind, it may be unwise for individual investors to keep positions open over the holiday weekend, given the potential for a significant downturn come Monday morning. 

On the other hand, a strategy could be to take advantage of investors’ optimism regarding performance leading up to Black Friday, which has generally seen retail companies outperform. 

Three Stocks to Watch This Black Friday 

Amazon (NASDAQ: AMZN)

Amazon will be one of the major players throughout the Black Friday – Cyber Monday sale period, with the e-commerce behemoth warning that sales this holiday season would be smaller than originally forecast. The firm has stated that it is expecting net sales of between $140 to $148 billion in the fourth quarter of this year, far less than the $155 billion analysts were expecting. With this all but priced in, a better-than-expected Thanksgiving weekend could see the stock regain lost ground in the short-term. From a technical perspective, price has rebounded strongly off of key resistance and may close the October 27 gap-down if sales exceed expectations. 

Walmart (NYSE: WMT)

Shares of Walmart have surged higher since plunging to its lowest levels since 2020 at the start of May, as the business reported stronger-than-expected sales through the third quarter of 2023. This promising report could be a sign of things to come for the American multinational this Thanksgiving weekend, and could provide even more impetus for the stock to continue its recent resurgence. With the stock recently filling in the May 16 gapdown, further gains could be at hand if price can remain constructively positioned above the $150 level. 

Target (NYSE: TGT)

The final stock to keep an eye on is Target, which has been one of the major underperformers within the retail sector throughout 2022. Indeed, its recent earnings report signalled that this holiday season may not be as positive for the department store as executives lowered their financial goals for the holiday quarter. Upper management is even prepared to offer steep discounts in the months ahead to clear out unwanted inventory. This could result in sales coming in far hotter-than-expected this Black Friday and may give the stock a much-needed boost in the short-term.

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