Updated on November 21, 2022
The phrase “Black Friday” in the stock market is in stark contrast to other specific black days on the traders’ calendar, such as Tuesday 1929 or Monday 1987. We have covered those dates in our extensive material on biggest stock market crashes in history. However, Black Friday has a positive connotation and it is widely anticipated by many.
Black Friday is traditionally the day after Thanksgiving. It is a shopping holiday, which sometimes is referred to as “the world consumption day”, on which people traditionally buy gifts for Christmas and New Year. Large-scale sales are typical for this day, supporting not only retailers but also the stock market. Black Friday is one of the most profitable retail days of the whole year and it marks the beginning of the holiday shopping season, which amount for about 19% of annual sales for many retailers.
In today’s article, we’ll take a look at the Black Friday effect and the tendencies observed over the stock market during the season sale at the year’s end. It is called “the holiday effect” — this means that the day before a holiday or long weekend tends to see higher trading volume in the markets, perhaps because investors want to make one last trade before the stock market closes for the week.
Shopping season
Despite the somewhat ominous color, the annual Black Friday certainly carries a positive connotation compared to the market crashes. This is because large-scale sales have a positive impact on companies’ revenues and signal the continued buying activity, which is important for economic growth. Around 30% of all retail sales in the US and Western Europe are in the holiday season, which kicks off with Black Friday.
All eyes on retail
Retailers are traditionally considered to be the primary beneficiaries of Black Friday and the sales season. The historically high index of consumer confidence in the United States and the rest of the world during the autumn sales period may positively impact such companies’ incomes. Traditional consumer goods companies include clothing, electronics, and beauty products. For instance, eBay and L’Oreal can stand as prime examples of fashion and beauty retailers. Consumer electronics giants such as for example Apple and Microsoft are also experiencing a massive surge in consumer demand for their products and services in the last week of November. For more stocks related to the consumer staples industry, you may visit the IQ Option website.
In addition to online retailers, stocks of tech companies such as for example Microsoft are among the beneficiaries of a possible post-Black Friday Christmas rally. One of Microsoft’s trump cards is the video game consoles division of the company. X-box is one of the most coveted gifts for children and teenagers, so we may expect to see more sales during the holiday season.
Stay online — stay safe
The worldwide COVID-19 pandemic times have made their adjustments in many consumer habits, including pre-holiday shopping. In conditions of a traditional shopping trip’s impossibility, the largest online shopping sites may receive the most significant benefit. It has been observed that users usually prefer to buy everything they need from one resource in order to save time. The obvious leaders in this context are usually the American whales Amazon and Walmart, and Chinese Alibaba.
The January effect
Another well-known hypothesis in the world of trading is known as the January effect. What is that? Simply put, according to this theory if a trader is having massive losses on his investment by the end of the year, he can probably write those losses off on the taxes. In January, traders who sold for tax-loss reasons may consider opening new positions, with the possibility of giving a stimulus to rising in price.
How may the January effect be considered?
Though it’s just a theory, there’s still a chance to catch the January effect. To do that traders usually start following low-priced stocks for instance with a tendency to fall in price at the end of the year. You may follow the stocks of your preference by adding them to the Watchlist placed in the traderoom.
