Last week was a relatively quiet time in the domestic markets. We did not receive a tremendous amount of economic data, and trading halted Thursday for the Thanksgiving holiday. Nonetheless, all 3 of the major domestic indexes experienced sizable gains in only 4 trading days.[1] By Friday, the S&P 500 added 0.91% and closed above 2,600 for the first time in its history.[2] The Dow was also up 0.86%, and the NASDAQ gained 1.57%.[3] International stocks in the MSCI EAFE had a 5-day trading week and grew by 1.85%.[4]
A variety of factors contributed to this performance – from growth in the tech sector to increasing crude oil prices. But a specific event also helped push stocks higher: Black Friday.[5]
The Black Friday Effect [dt_gap height=”10″ /]
What happened on Black Friday this year?
In the U.S., Black Friday is big business. The day after Thanksgiving is typically the year’s biggest shopping day and jump-starts the holiday season with enticing deals.[6] The financial markets even close early because trading activity is traditionally so slow.[7]
This year, a combination of low unemployment and healthy consumer confidence may help the retail industry.[8] Many retailers saw lines forming outside their locations on Thanksgiving, while digital shopping also picked up. Shoppers spent $1.52 billion online by 5 p.m. ET on Thursday. And the next morning they made $640 million in online purchases by 10 a.m. – 18.4% higher than at that time last year.[9]
Why does holiday shopping matter?
Black Friday may not have the same urgency it once did, as fewer people fight for deals in person.[10] Even without huge crowds at brick-and-mortar shops, many retailers declared the day a success – and posted stock gains on Friday.[11]
Overall, industry experts predict holiday sales may grow by as much as 4.5% compared to last year.[12] This growth matters because strong consumer spending is good for the economy. In fact, consumer spending accounts for more than two-thirds of gross domestic product. If spending is flat, so is economic growth.[13] Thus, solid purchasing can help drive our economy to pick up speed.
We were pleased to see the markets experience a positive Black Friday effect, and we’ll continue to review this year’s spending data and stock performance. In the meantime, if you have any questions about where our economy stands or what lies ahead, please contact us.
ECONOMIC CALENDAR
Monday: New Home Sales
Tuesday: Consumer Confidence
Wednesday: GDP, Pending Home Sales Index
Thursday: Jobless Claims
Friday: Motor Vehicle Sales, PMI Manufacturing Index, ISM Mfg Index, Construction Spending
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Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5- year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
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Any economic and/or performance information cited is historical and not indicative of future results. The Retirement Solution Inc. is an investment advisor registered in each state The Retirement Solution Inc. maintains client relationships.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia and Southeast Asia.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
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[1] www.cnbc.com/2017/11/24/us-stocks-black-friday-retail-amazon-holidays.html
[2] www.cnbc.com/2017/11/24/us-stocks-black-friday-retail-amazon-holidays.html
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
[4] www.msci.com/end-of-day-data-search
[5] www.cnbc.com/2017/11/24/us-stocks-black-friday-retail-amazon-holidays.html
[6] www.thebalance.com/what-is-black-friday-3305710
[7] https://www.morningstar.com/news/market-watch/TDJNMW_20171124223/update-black-friday-which-markets-are-closing-early.html
[9] www.cnbc.com/2017/11/24/black-friday-frenzy-as-throngs-of-shoppers-line-up-for-deals-in-us.html
www.cnbc.com/2017/11/24/online-spending-up-18-percent-from-last-black-friday-morning-adobe.html
[11] www.cnbc.com/2017/11/24/black-friday-bargains-were-bigger-on-average-last-year.html
[12] www.cnbc.com/2017/11/24/black-friday-frenzy-as-throngs-of-shoppers-line-up-for-deals-in-us.html
[13] www.thebalance.com/consumer-spending-trends-and-current-statistics-3305916
