Black Friday typically kicks off the best two months to invest in the market. Can it happen again with stocks already at record highs?

black-friday

A week from today, Black Friday will officially kick off the holiday shopping season. Unofficially, it will also signal the best time to buy stocks.

December has long been the best month to invest. Since 1950, the S&P 500 and the Dow Jones Industrial have averaged a 1.7% return in December, better than any other month.

It’s no mystery as to why. Holiday shopping season is big business. According to the National Retail Federation, the average American will spend $804.42 on Christmas, Hanukkah and Kwanzaa gifts this year. That’s money in the pockets of major retailers – which translates to monster fourth-quarter earnings results once January rolls around.

Combined, November, December and January constitute the market’s best three-month span, with an average return of 4.4% in the S&P. For the most part, that starts with Black Friday.

Just look at this five-year chart, and notice where stocks begin to put their foot on the gas.

Black Friday and the S&P 500, Five-Year Chart

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After every Black Friday, stocks went up. How far up? Since 2009, the average bump from Black Friday to the end of the year has been 4.2%.

Can we expect those kinds of returns this year, even with the market already at an all-time high? It happened last year. The S&P 500 was fast approaching 1,800 for the first time ever when Black Friday arrived. By the time the calendar flipped to 2014, it was up to 1,848.

What made last year’s end-of-the-year bump more amazing was that Black Friday sales actually slipped.

Americans spent $57.4 billion last year over the four-day Black Friday weekend, which actually starts with Thanksgiving. Believe it or not, that was a 2.9% drop-off from the previous year, the first such decline since 2009.

That doesn’t mean there were fewer people shopping, necessarily. Many of them merely shifted to Cyber Monday.

Cyber Monday is a relatively new phenomenon that occurs on the Monday following the Thanksgiving weekend. Cyber Monday is the online version of Black Friday, giving holiday shoppers the opportunity to buy gifts at a deep, once-a-year discount from the comfort of their own homes.

Last year, Cyber Monday sales rose 16% to a record $2.3 billion, essentially erasing the 2.9% decline in Black Friday sales. Expect that trend to continue this year.

Sixty billion dollars in sales over a five-day span tends to move the needle on Wall Street. Naturally, retail stocks are the ones that benefit most.

In the past, we’ve recommended Macy’s (NYSE: M), Chipotle (NYSE: CMG), Home Depot (NYSE: HD) and Best Buy (NYSE: BBY), to name a few. Given the rising popularity of Cyber Monday, add Amazon.com (NASDAQ: AMZN), eBay (NASDAQ: EBAY) and perhaps Groupon (NASDAQ: GRPN) to your watch list as well. All have gotten nice boosts from the Black Friday/Cyber Monday weekend in years past.

Even if you’re reluctant to invest in the retail sector, the holiday shopping season tends to lift all boats. Stocks across the board historically get a boost this time of year.

Will it happen again on the heels of a 5.6% gain in the last month? By this time next week, we may already know the answer.

Stay tuned.

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