How does Black Friday affect stock markets?

Black Friday is hailed as the kickoff to the holiday shopping season, and it’s one of the busiest, if not manic, shopping days of the year.


But where does the term ‘Black Friday’ come from? Well, once upon a time, Black Friday used to refer to stock market crashes in the 1800s. Since then, and thanks to the madness around the day’s special deals, stocks (mainly retail and consumer) usually get a boost from the prominent retail event. 


The market movement around Black Friday is closely linked to a sharp rise in Black Friday retail sales. This is because consumers often follow up Thanksgiving by shopping for Black Friday sales. 


Therefore, this period is often seen as a consumer ‘sentiment indicator’. If retailers show strong numbers, investors might believe that this is the start of a robust shopping season. Therefore, they push stock prices up. 


Respectively, if retailers cannot satisfy consumers on Black Friday, investor confidence could plunge, possibly causing stock prices to drop.


As supply chain ‘disasters’ worsen, it’s expected to be a very strong holiday season. Some experts are even predicting a record-high shopping period. Thus, considering the limited availability, consumers will likely spend as much as they can now to get what they need before any rise in prices. 


Further shifts in the market may be seen due to the ‘holiday effect’, i.e., seasonal investor optimism.

How does Black Friday affect stock markets?

‘Happy Black Friday! May your lines be short and your tempers too :).’

The stock market sees movement around this time of year mainly due to the aforementioned holiday effect. Markets tend to see boosted trading volume and more significant returns the day before a holiday or long weekend.


Apart from the holiday spirit, which boosts investors’ optimism, there is another reason for the holiday effect. Investors get in their last trades before the stock market closes for the week. As a result, US stock markets are closed for half the day on Black Friday.


However, the Black Friday effects are usually short-lived. 


Investors sometimes turn to Black Friday sales numbers as an indication of a specific retailer’s health or even the overall state of the retail sector. 


However, there is no empirical data or scientific evidence to support this theory. Data hints that there is no connection between a stock’s Q4 performance and the company’s Black Friday sales.


So, the best practice is to consider a company’s overall health when deciding which stocks you will trade.


How about speculating on the future movements of retail stocks by trading them as CFDs before or after your Black Friday shopping? Check out our product page to find all our stocks, commodities, indices, cryptos and forex pairs!

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