Black Friday & Cyber Monday vs. the Stock Market?

Check – Add – Shop, Check – Add – Shop. If Black Friday and Cyber Monday would have an anthem, this would be it! The highly anticipated shopping days are like the adult equivalent to kids’ Christmas Eve. But what we would really like to know is: how do they influence the markets? Let’s start by taking a closer look at the stories behind these major spending events!

Sure, Black Friday is one of the most important days for all retailers worldwide – and for good reason. It is the day wholesale stores normally start to turn their profit for the year! The explanations behind the origin of the name are numerous, starting from black ink, in which accountants write profits – VS red for losses.

They go all the way to the fairly odd association with the stock market crash of 24th September 1869, as gold prices plummeted after long-term market speculations.

Cyber Monday, on the other hand, flourishes a more positive back-story. Created by a team of marketers, it was meant to become a counterpart hook for online retailers to compete with the Black Friday success. It didn’t catch on too fast, in fact in 2005 only 50% of retailers joined the frenzy. However, as the digital revolution progressed it lead to the success of today.

If 2017 Cyber Monday proved to be the largest online sales day in history, this years’ version is expected to become a more impressive numerical success. The market forecast are even hinting that both, Black Friday and Cyber Monday are likely to become events to last for a full week.

Could Black Friday and Cyber Monday translate into long-term losses, or gains?
According to Mark Hulbert, a Market Watch analyst and major financial newsletter writer, there is no correlation between the Black Friday bump and Q4 performance. By taking into account 114 years of market activity, he conducted an interesting study and came to the conclusion that, although Black Friday and Cyber Monday determine the look of things for the whole year of the retail market, the same doesn’t work for specific stocks.

“The correct investment conclusion to draw is that you learn nothing about the stock market’s performance in December, by focusing on its immediate reaction to Black Friday” – Mark says.

Many analysts and investors today agree with him. In fact, they state that the two days only possess short-term gain potential, for CFD traders, and more often than not, by the end of the year, the market performs exactly the opposite of these days’ indicators, providing for an inverse correlation!

Surely, this contrasts the wide-spread Keynesian belief, that Black Friday and Cyber Monday are determining factors for long-term stock price panic or boost.

Nevertheless, it doesn’t mean we should dismiss either one of the two major schools of thought, as successful CFD trading is all about gathering information and evaluating all of it at once, when making our choices.

In any case, if you are looking to hold on to stocks from several weeks and up until the next Earnings Season (January), the general advice remains to watch trends, focus on fundamentals and pay attention to the bigger retail, technology and e-commerce entities, who have more promising gains from the upcoming sales.

Furthermore, it’s wise to keep in mind the undeniable success of online sales. After all, it’s a fact that Cyber Monday seems close to topping Black Friday, with its representatives in the face of Amazon, Alibaba, eBay and other giants of the industry. But will it? Let’s wait and see!

Picture: pixabay.com

 Trader Aleksandar Kumanov

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