By Rob Colville on November 27, 2015 in
It’s an equity market opportunity that accounts for billions each year, yet many traders and investors worldwide may not even know about it. We’re talking about a retail phenomenon impacting hundreds of millions of consumers, mainly in North America. That phenomenon is “Black Friday,” and it’s happening today!
So for traders around the world, do you know what Black Friday is, and understand the potential implications for traders and the broader equity market? Right now, even as we speak, business is booming for major retailers, whose shares could get a serious boost from Black Friday consumer spending. So behold the once-a-year phenomenon called “Black Friday,” and whether you trade the news or avoid it, be a more informed trader just for knowing about it.
Black Friday represents the official start of the holiday shopping season. Occurring every year the day after US Thanksgiving, it’s called “Black Friday” because the deep discounts and sales on many of the most desired products—everything from clothing and electronics, to new cars—help companies get “in the black,” or become profitable, not just for Q4, but sometimes for the full year.
And, more than just Black Friday, there’s also the impending “Cyber Monday,” when the biggest sales of the year will happen on retailers’ Web sites as well.
Consumer behavior changes remarkably this time of year, with millions eager to make a range of purchases, including holiday gifts to big-ticket items like household appliances, TVs, computers, and so much more, many of which will sell for literally hundreds—and sometimes thousands—less than any other time all year.
Believe it or not, some consumers even camp out for days or even weeks outside of the stores so they can be first in line when the doors open, often on Thanksgiving night, or at midnight, or even in the wee hours of the early morning!
After the equity market is closed in the US on Thanksgiving, billions of dollars in retail sales will happen on Black Friday alone, and when the retailers’ results come in days or weeks later, these shares, as well as the broader equity market, are likely to be propped up on good news.
This large-scale spending and influx of earnings may be what helps power another once-a-year equity market phenomenon: The “Santa Claus” rally, where stocks tend to rally heading into year-end.
Apple, Samsung, and a host of industry-leading companies have even been known to launch new products in time for Black Friday and the annual holiday shopping rush, and popular retailers are in full focus among analysts because their quarterly and full-year financial results can be made, or broken, by Black Friday and holiday sales.
While we aren’t keen to trade the news alone, nor necessarily pick individual stocks, Black Friday can be considered a fundamental factor that perennially drives the equity market. So for traders considering buying a broad US equity market index fund, or even a particular sector ETF, certainly figure in any potential impact of Black Friday. Even if it’s not a driving force that validates (or invalidates) your position, the effects of this once-a-year event will be felt throughout the US equity market and beyond.
Well as it turns out, “The sale of the year” started today! And while “Black Friday” may be a phenomenon that not all traders around the world know about, it can be a driving force for the equity market nonetheless…so be advised!
Now, this might be the really fun part: What do you think about this consumer phenomenon? For traders outside the North American markets, have you heard of Black Friday before? And who among us shops on Black Friday and/or Cyber Monday? Share your thoughts in the comments section below, and Happy Black Friday, everyone!