Top Nav

Will Black Friday Save the Stock Market Again?

Ian Wyatt

Investors haven’t had much to be thankful for on Thanksgiving of late.

Stocks have tanked three years in a row during Thanksgiving week. Last year was an especially brutal performance – the S&P 500 fell 4.7% in the three-and- a-half trading days that comprised the 2011 Thanksgiving week.

So big investment returns are typically not served up as a side dish to our turkey and cranberries. Luckily, that all changes the day after Thanksgiving.

It doesn’t date back to the days of Pilgrims and the Mayflower. But Black Friday has become a Thanksgiving week tradition nonetheless.

And the first day of the holiday shopping season has become a godsend for retailers and investors alike.

U.S. shoppers spent a record $11.4 billion at retail stores and malls on Black Friday a year ago, according to research firm ShopperTrak. At the time, it was just the shot in the arm the sluggish U.S. economy needed. It was also enough reason for investors to get back in the game.

Stocks skyrocketed in the weeks after Black Friday. The S&P gained close to 9% over the next seven trading sessions. The Dow Jones Industrial Average gained nearly 1,000 points.

But it was far from the first big post-Black Friday move.

Stocks climbed 6% in late November and December in 2010. In 2009, stocks shot up 3% by year’s end. In 2008 – even as the U.S. was mired in its worst recession since the Great Depression – stocks managed to surge 9% in the month that followed Black Friday.

That brings us to today. As usual, stocks have fallen sharply in the weeks leading up to Thanksgiving – though yesterday’s 2% bounce-back was a nice pre-holiday boost. Since the election, the S&P is down 3%, hitting a four-month low last Thursday.

Assuming a fiscal cliff deal gets done soon – and President Obama has been adamant about coming to some sort of agreement before the holiday shopping season – Black Friday should once again have a positive impact on the stock market.

Clearly the uncertainty surrounding the fiscal cliff clouds the picture a bit more this year. But as the rally in December 2008 showed, Black Friday has become such a money maker for so many companies that it’s capable of jumpstarting a market rally even in the face of major economic headwinds. In recent years at least, Black Friday seems to trump whatever negative conditions are affecting the market.

So it might not be a bad idea to buy those stocks you’ve been aching to buy now. This might be your best chance to beat the holiday rush.