Mark Hulbert: What Black Friday and Cyber Monday sales tell you about retail stocks, recession and the economy

by | Nov 23, 2022 | Stock Market

There’s one more thing you should avoid talking about during Thanksgiving dinners and other social events: how U.S. retailers are faring with their Thanksgiving weekend sales. That’s because initial reports provide no insight into the strength of the retail sector in particular or the U.S. economy in general.

In fact, the reports are worse than worthless. More often than not, they lead you in the wrong direction. For example, if initial reports show retail sales are weaker than expected and the stock market falls, it more often than not will reverse itself and rise through the end of the year. Just the opposite tends to happen when initial reports show stronger-than-expected sales. These are the conclusions I reached upon analyzing the post-Thanksgiving behavior of the S&P Retail Select Industry Index
Specifically, I compared this index’s two-day return following Thanksgiving with its performance after Cyber Monday through the end of December. In 73% of the years since the index was created in 1999, its direction in that initial two-day post-Thanksgiving window was the opposite of its direction from then until the end of the year. The chart below summarizes what I found for the performance of the retail sector over the Cyber Monday through year-end period. Notice that it performed quite well, on average, in years in which it fell over the first two post-Thanksgiving trading sessions — and vice versa.

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