How is the Stock Market Affected by Black Friday

How is the Stock Market Affected by Black Friday

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    Alvexo Blog on Black Friday

    Black Friday is a crucial day in the calendar of shopping events within the United States, especially the retail store-owners. It has a big influence on the retail sales and spending patterns across the nation. Black Friday is the first day following Thanksgiving. During this day, retail stores may witness increased sales because people tend to save and prepare to take advantage of the numerous price cuts, discounts, and other savings on products, which are offered by retail stores.

    Sometimes, even with the big promotions and discounts, consumers may not be willing to spend money especially if they foresee some hard times in the future. This means that they may hold spending and consider saving the money in order to prepare for difficult times ahead of them.

    Many experts in the retail market make predictions regarding the sales and activities of the day. Investors also keenly watch and reposition themselves as the events unfold and at times, the confidence of the investors might be affected by the expectations. In case, consumers show a sign of spending more money on this day, it means retailers are likely to record increased sales. This in turn makes investors feel that things are shaping up and probably a profitable shopping season is likely to be experienced.

    Owing to this kind of confidence build on investors, it has some reflection on the stock market; hence, the events of Black Friday may be seen as an indicator for the financial markets. On the other hand, if retailers do not realize increased sales, it may spell perils in the financial markets.

    The health of economy is puffed up if consumers seem like they are saving too much. In that way, the stock market may be hit to some extent. During those days before online shopping started, it would even be regarded as a warning for the financial markets if the weather restrained shoppers from shopping during Black Friday.

    However, today, shoppers can do their shopping online and weather may not necessarily be seen as an impediment to spending, although it has some effects. There are people who want to visit the stores during those days and do their shopping. Others would simply buy online and have their products delivered to their doorsteps.

    Spending during Black Friday and Thanksgiving

    Thanksgiving has a big meaning to the businesses, especially those dealing with food. In a market survey conducted in 2011 by the National Turkey Federation, it indicated that about 90 percent of Americans prefer eating turkey on Thanksgiving. While there may be a lot of activity during this day, it is unlikely that the stock market will be affected.

    Black Friday has been given the name because in the field of business accounting, it is when sales are able to put businesses “in the black”. This is when businesses record increased sales, an indication of profitability. Being “in the black” is a kind of accounting terminology, which stands for profitability.

    When business records losses, they are shown in red and when they attain profits, they are recorded in black. Many retailers believe that Black Friday can determine the annual performance of their businesses. In regard to this, investors see Black Friday sales as capable of showing the overall health of the retail industry.

    Spending can drive economic activity and when the sales figures in Black Friday are lower, it could mean a slowed growth in the industry. The stock market may also be affected by extended periods of shopping after Thanksgiving. The holiday effects may see increased trading activity during and after Black Friday.

    Black Friday and its effects on Stock Market

    Investors and analytics do not think that Black Friday affects the sales and profitability figures recorded by businesses in the Q4. The analysts and investors instead feel that the gains or losses, which are experienced during Black Friday, are short term. A Market Watch analysis done in 2008 by Mark Hulbert examined the trend in stock market following Thanksgiving for a period of 114 years. This was compared to the rest of the year.

    In the analysis, it indicated that there was no relationship between an increase in sales in Black Friday and the performance in the Q4. While Black Friday and Thanksgiving may have major trading implications on short term, they may not induce any long-term effects on the stock market. Therefore, the sales figures and activity in the retail market seen during these days; they may not dictate how the stock market is going to perform in the long term.

    The stock market still remains uncertain after this period regardless of whether there was a boom or dip in sales. Those who would want to use Black Friday and Thanksgiving as a measure of the market volatility or as an indicator of the future stock market movements may want to re-examine their decision.

    In essence, Black Friday may only have temporary effects on trading in Wall Street but the long-term predictions remain uncertain. Traders should trade wisely at this time of the year and not blindly follow the trends in sales within the retail market.

     

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