Spark Global Limited reports：
For US stocks, the last full trading week in November is over, and the market is ready to welcome the Thanksgiving holiday.
On Thursday, November 26, the U.S. stock market will be closed for Thanksgiving Day, and it will only open for half a day on Friday. The NYSE will close at 1pm Eastern Time on Friday.
Thanksgiving is not only synonymous with low trading volume, but also has a “holiday effect”.
Some analysts believe that the market during Thanksgiving will usher in a period of sharp fluctuations. However, some analysts say that the holiday effect on US stocks is short-lived.
Wall Street’s views are mainly divided into two schools.
Some believe that due to the holiday effect, seasonal optimism of investors, and a series of favorable factors such as the “Black Friday” shopping festival that drives consumer retail sales to rise sharply, the market after Thanksgiving may usher in a wave of rising prices.
Based on the historical trend of the Standard & Poor’s 500 Index over the past 70 years, Bespoke Investment Group, an investment research institution, concluded:
Since 1945, Thanksgiving has risen by an average of 60 basis points during the week, with the best return on the day before Thanksgiving (Wednesday). In addition, Friday’s market trend is not bad.However, some analysts believe that the holiday effect has no real predictability on the market trend of US stocks in the fourth quarter. Although they admit that there may be some volatility in the stock market after Thanksgiving and Black Friday, the impact may be short-lived.
(160.92, -2.13, -1.31%)
Even if we see changes in market trends around Thanksgiving and Black Friday, the impact may be short-lived, and we expect the market to return to normal soon.
Why do US stocks have a “holiday effect”?
First of all, the period from Thanksgiving to Christmas is the traditional peak consumption season in the United States. Especially the Friday after Thanksgiving is called “Black Friday”, which is the annual “Double Eleven” shopping festival in the United States. It will surpass the performance of retail companies and drive up the company’s stock price.
Secondly, the exchange will be closed on Thanksgiving Day and Christmas Day. These additional rest days will cause short-term fluctuations in the market. The market often sees increased trading activity and increased returns the day before the holiday. This phenomenon is called “Holiday effect”.
However, this rule is not a “hundred-shot”.
Although some analysts believe that the holiday atmosphere may bring optimism to investors, which translates into stock returns, there are no empirical data that exactly match to support this.
It is worth noting that the market trends around Thanksgiving and Black Friday can also be attributed to another major factor-shopping.
Consumers usually use the “Black Friday” promotion during Thanksgiving to buy special purchases, so Thanksgiving is also regarded as an “emotional indicator” of consumer health.
If the retail industry shows better data, investors may think this is the beginning of a strong shopping season, thereby pushing up stock prices.
Conversely, if the retail industry fails to meet market expectations on Black Friday, investor confidence may plummet, which may cause stock prices to fall.
Can the “holiday effect” bring optimism to investors and turn it into stock returns?
It is true that the retail industry is the best performing sector for US stocks in the week before and after Black Friday. Historical data shows that holiday spending from Black Friday to the end of the year accounts for about 17% to 18% of total US retail sales (excluding automobiles).
From 2010 to 2020, the Standard & Poor’s Retail Selection Index (SPSIRE) rose by 3.23% during this period, while the average return of the S&P 500 was about 1.8%. The rate of return is 2.57%.
However, some analysts pointed out that even if retailers have strong sales during Black Friday, this performance has nothing to do with the company’s overall profitability or financial status.
In addition, before the fourth quarter earnings report is released in January of the second year, investors may not be fully aware of the company’s performance.
This means that there is no inevitable connection between the market trend in the fourth quarter and the sales volume of Black Friday.