Will Black Friday Help Investors See Green?

By Author: Goutam Roy
Total Articles: 6
Comment this article

Will Black Friday help investors see Green?
Black Friday has always been the moment of truth for retailers. The amount shoppers spend over this period affects
many retailers. Consequently their underlying earnings may either reward
investors who own their shares, be neutral or in some cases hurt their
portfolio due to the lack of anticipated profits.
It’s on this day, after all, that investors get their first indication of how strong this year’s holiday season
is shaping up. Since most retailers’ profitability for the entire year is
dependent on how they perform during the holiday season, Black Friday also
gives investors a rare insight into the health of the overall U.S. economy.
The economy has been and continues to battle the recession woes. As we try and shake out of this
recession. Our stock market has been bouncing around going sideways for the
last six months. Looking at the Dow, which started the year at 11575.51 peeked
in April to a high of 12,807 and is currently back at 11,206.94, the next
catalyst for stocks may be the all important ...
... holiday gift buying season.
According to a recent article in the NY times “Consumer spending accounts for about 70 percent of American economic
activity”. It is for this reason that investors watch retail sales so
closely. The holiday shopping spree starting with Black Friday will show how
aggressive consumers will be and how willing they are to open their wallets and spend.
This year Black Friday will start on Friday November 25th. Investors will be focused on the
holiday shopping season as one of the barometers to watch if consumers are
spending and cash registers are ringing. Without a rebound in consumer
spending, it will be difficult for our economy to get the lift it needs to
avoid the double dip recession so commonly feared by all investors.
At times, in a weak economy, shoppers scale back and limit their spending. Comparing this year’s holiday season to
last years, shoppers are expected to spend more. According to a recent National Retail Federation
survey, malls around the U.S. have reason to still be jolly. Overall holiday retail sales are expected
to increase by 2.8% in November and December, adding up to $465.6 billion,
mostly spent on gifts and seasonal merchandise for the upcoming holiday season.
With the European debt crisis in the headlines and now with all the talk about
the crisis in Italy, our stock market has been shaky. Many may argue that
seasonal greetings from our friends in Europe will continue to dominate our
markets volatility, and this year investors will not be looking toward
retailers for market direction. A super sales season or any major surprise will
always help move markets, and if sales exceed expectations it would be a shot
in the arm for markets volatility. On the other hand, if sales turn out to be
worse than expected, the market will disappoint.