Thanksgiving is upon usfollowed by the busiest in-store shopping day of the year: Black Friday. Then next week begins with Cyber Monday, the biggest online shopping day of the year.
Together, those events mark the unofficial start of the holiday shopping season. Next week’s traffic and sales reports will be used to gauge overall consumer economic strength, which could be a catalyst for stocks in either direction. In this article, I’ll look at how stocks typically performed the week after Black Friday and what that meant going forward.
The table below summarizes the returns of the S&P 500 Index (SPX) since 1990 for the week after Thanksgiving, when holiday shopping data first appears in the news. The week has historically skewed bullish, with an average increase of 0.66%, up from 0.18% in a typical week.
Additionally, 69% of weeks following Black Friday were positive, compared to 57% of all weeks. I thought there might be more volatility due to reactions to the retail purchasing data, but the standard deviation has been less than the norm.
If you want to place a short-term bet next week, it is best to wait until Monday night to participate. Cyber Monday has been a terrible day for the SPX, which averaged a 0.26% loss, with only 40% of the returns positive.
In fact, 10 of the last 13 Cyber Mondays have been negative. The rest of the week looks better, with Wednesday and Friday standing out as the best days; the latter averaged a 0.55% profit and 77% of the returns were positive.
Since Black Friday and Cyber Monday are often considered economic indicators, I was wondering if the market’s reaction to those results could indicate what’s to come. The table below breaks down the SPX’s next three-month performance based on how much the index moved during the week after Thanksgiving. Historically, stronger performance next week has been aligned with stronger returns afterward.
If we go back to 1990, when the SPX gained at least 1% after Thanksgiving week, it averaged a 3.9% return over the next three months, with 77% positive returns. When the week was flat (up or down less than 1%), the index averaged a 2.4% gain, with 56% positive returns. But when the week was negative, it averaged a 4.1% loss over the next three months, with only 33% of the returns positive.
This indicator does not work when the time period is shortened; The table below summarizes SPX’s returns for the rest of the year. When the week after Thanksgiving was down 1% or more, the SPX gained 1.6% for the year, with 83% positive. When the week after Thanksgiving rose 1% or more, it gained 0.52% on average, with 69% of the returns positive.
