Black Friday & The Stock Market: Economy, Consumers & Shares

First, it was known for the Black Friday stock market crash – then for being the biggest shopping day of the year. The meaning may have evolved, but today, Black Friday is still a subject for stock market scrutiny. Which retailers look set to benefit? What can we learn from the price action of past years? And what factors help you trade the period? We’ll find out. But first, a history lesson.

WHAT IS BLACK FRIDAY?

Black Friday was originally the term used to describe the stock market collapse of 1869 when American investors Jay Gould and James Fisk caused a financial meltdown after a failed attempt to corner the gold market.

The modern concept of Black Friday, however, came about in the 1940s to entice people to the stores the day after Thanksgiving. Named for its tendency to contribute to traffic accidents, Black Friday later took on a new meaning as companies expected to make enough sales to put them ‘in the black’, or profitable, for the year.

It was not until the 1980s, however, that retailers began to slowly use the day as a marketing tool, culminating in its widely-held status as the most popular shopping day of the year in the 2000s. Today, Black Friday is more than just a US-based tradition; it has spread to some 20 other countries, including Mexico, Russia and Pakistan.

In conjunction with Cyber Monday, the Monday after Thanksgiving that pushes online sales, the shopping period is seen by some analysts and market commentators as providing a measure of economic prosperity. That measure can then be used to predict the performance of other assets such as stocks.

THE INFLUENCE OF BLACK FRIDAY

Marketing gimmick or useful indicator; what’s the overall influence of Black Friday? To answer, it’s worth examining its effect on retail spending and consumers, the economy, and the resulting effect (if any) on traders and stocks.

1) Retail spending and consumers

There is no doubt that Black Friday influences consumers to spend. Across a range of countries, the event is promoted as a rare chance to save money across a gamut of products, from laptops to lawnmowers, and historical media coverage of the event has featured stampedes in retail outlets as bargain-hungry punters battle for deals. In 2018, Adobe Analytics data shows $6.22 bn was spent online in the US, representing a 23.6% increase on the previous year. Furthermore, every Black Friday bar one has seen higher retail sales volume than any other date.

1 2 3 4
View single page >> |

Disclosure: See the full disclosure for DailyFX here.

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.