What is Black Friday?

Black Friday is referred to the day following the U.S. Thanksgiving holiday, which has also traditionally been a holiday itself for many employees. Retail stores typically open early and offer huge discounts. In the year 2020, 186.4 million US customers shopped online and in store, despite of disruption caused by the pandemic. Black Friday is considered as the beginning of the holiday shopping season.

Speaking on Economic front, the sales made on Black Friday are often watched as a test for the overall economic condition of the country and a way for economists to measure the confidence of the average American when it comes to discretionary spending.

Understanding Black Friday?

Now lets talk from  a trading perspective, we will look for the most tactful strategy to place orders and benefit from market swings possibly making the case for an interesting session with plenty opportunities. This article will discuss some interesting topics surrounding the Black Friday.

Black Friday has magic ability as it converts even inactive shoppers to active consumers. Consumers come up with a reason to search for deals that they can benefit from , even if they don’t really have need of a specific item. In this case however, the benefit is not only on the side of the consumer, but also on the side on the business. Black Friday helps the businesses to create a bundle of products to satisfy the need of a big crowd of consumers. This will also help the businesses to get rid of the product that had been mounting on their shelves for some time. With these circumstances, shops can entice consumers to buy more products/services at better prices. 

Black Friday in most countries of the world has been seen as an event that consumers look forward to physically going down to the shops and spending most of their hours there.

Impact of Black Friday in trading

Other countries who follow the Black Friday event where retail sales are expected to increase might also follow a identical pattern. Suppose if the sales beat expectations, then the theory says that consumers are likely to keep driving the economy. Hence it would boost the stock market. As a result, it would also mean a shift away from safe havens in forex over the rest of the quarter.

Usually the retail sector tends to outperform the benchmark S&P500 in the ten days after the holiday.

Whereas on the other hand, if sales underperform, that could be an indication that the economy is weaker than anticipation. we could see the market drifting lower and traders get attracted to the safe haven in forex through the rest of the year.

Last year was the first time that the retail sector underperformed the S&P500 following Black Friday. However, this was mostly because of the impact of covid.

Our View :

A cautious approach is recommended for traders on Black Friday the days before and after. Other events that are imminent nearby Black Friday are the US Thanks Giving holiday on Thursday and the following Cyber Monday.

A good metric for traders to make decisions is to observe the major stock indexes reaction upon the opening, while focusing on currency indexes can also be helpful in this case. Traders can also focus on the results derived from the Black Friday event especially considering the sales in terms of money and consumers.