Black Friday And The Stock Market – What You Need To Know

With the UK now in the midst of Black Friday and coronavirus restrictions no longer in place, retailers on these shores are bracing themselves for a huge uptick in consumer spending.

The Black Friday weekend also represents big business across the globe, with Canadians conducting one out of every five (20%) of total online shopping transactions during the weekend. In the US, total Black Friday spending reached $7.4 billion in 2019, with this year’s figures set to exceed this amount.

Of course, BlackFriday also has a direct impact on company share values and the stock market as a whole. We’ll explore this further in the article below.

What is Black Friday and How Has it Evolved Over Time?

‘Black Friday’ is a colloquial term for the final Friday in November (usually following Thanksgiving in the US). 

During this time, both corporeal and ecommerce stores offer highly promoted sales and discounted prices on a diverse range of selected goods, while the consumer holiday is often defined by extended opening hours and increased customer activity.

Interestingly, the term ‘Black Friday’ actually dates back to a financial crash that occurred in 1869, while it took on its familiar commercial meaning in the retail world in 1950s Philadelphia.

It wasn’t until the turn of the century that Black Friday earned cult status among shoppers, when retailers began to compete more aggressively for increased custom and some physical stores began opening their doors at midnight!

This trend has continued as the Black Friday period has extended, with many brands now extending offers over a period of several days during the second half of November. Of course, the rise of ecommerce has also created a far greater focus online, with a growing number of retailers adjusting their models as a result.

How Does Black Friday Affect the Stock Market?

There’s no doubt that investors are quick to trade stocks and equities through the MetaTrader 5 during Black Friday and Cyber Monday, in the belief that an uptick in sales and demand will translate into short-term gains.

However, reports from 2019 showcased that the S&P Retail Select Index fell by 0.9% on Black Friday, and a further 1.1% on Cyber Monday, with this continuing a 20-year trend which revealed an inverse relationship between the market’s post-Thanksgiving performance and its return through the end of the year.

But why does the retail market’s performance decline during Black Friday and Cyber Monday?

Well, it may have a great deal to do with the all-too human tendency to overreact and the ongoing struggle to manage expectations. After all, retailers and investors often enter periods like Black Friday with great hope and anticipation, creating unrealistic expectations with regards to sales and disappointing investors in the process (particularly during the coronavirus pandemic).

This is something that investors need to be wary of, while they should also aim to be selective when choosing the Black Friday stocks that they invest in.