What can investors look forward to as Black Friday approaches?

Zhitong App noticed that as Thanksgiving week passed, investors' attention shifted to Black Friday, the unofficial start of the holiday shopping season. In the coming week, the analysis of Black Friday sales, foot traffic trends, and the inevitable skirmishes at Walmart will be key indicators for evaluating consumer strength and overall economic indicators. For investors, this week is an enlightening period to observe the stock market.

Analyst Rocky White delved into whether the period after Thanksgiving has proven to be a reliable indicator of the stock market and explored its potential impact on future market trends. In addition, White will list some retailers and other related stocks and their performance in the crucial week after Black Friday.

Stock market performance in the week after Black Friday

The first table below summarizes the performance of the S&P 500 index in the week after Black Friday. The index has been on the rise since 1990, with an average weekly gain of 0.65%, compared to an average gain of 0.17% in other weeks. More importantly, the proportion of positive returns is higher than in typical weeks (67% vs. 56%). White suggests that due to the reaction to retail shopping data, the standard deviation for this week may be higher, but that is not the case.

The week after Thanksgiving has been particularly bullish in recent years. In the 13 Black Fridays since 2010, the average gain in the following week was 1.42%, with 77% of returns being positive. The typical weekly return is 0.22%, with 58% being positive. Since 2010, the standard deviation has been slightly higher than the market.

Black Friday Week Indicators

If insights into the market can be gained from Black Friday reports, perhaps they can provide clues to the stock market trend. The table below shows the performance of the S&P 500 index in the following three months, depending on its performance in the week after Black Friday. It turns out to be an excellent indicator for predicting the next three months. When the S&P 500 index rises 1% or more in the week after Black Friday, the average return in the next three months is 3.9%, with 77% of returns being positive. When it falls 1% or more in the following week, the index averages a decline of 4.1%, with only 33% of returns being positive.

When the time range is shortened, this indicator becomes ineffective. The table below shows the results for the remaining time this year. The last few weeks of each year have historically been bullish, with investors receiving positive average returns and a high proportion of positive returns in any case. This may be due to other factors at play during the last few weeks of this year (such as tax reasons, end-of-year portfolio adjustments), and then the indicator can come into play after that.

Stocks to Watch Next Week

Finally, here are some Standard & Poor's 500 Index retailers and other stocks related to the holiday shopping season. The table summarizes the stock performance in the week following Black Friday over the past 10 years. Nike (NKE.US) and HP (HPQ.US) top the list, with 8 out of the past 10 years being positive. It is worth noting that the pioneer of retailers, Amazon (AMZN.US), ranks last with an average loss of 1% this week and a return rate of only positive over the past 10 years.