Top Stocks to Watch After Thanksgiving Week

Thanksgiving is upon us, followed by the busiest in-store shopping day of the year: Black Friday. Then next week kicks off with Cyber Monday, the biggest online shopping day of the year.

Together, those events mark the unofficial start of the holiday shopping season. Next week’s traffic and sales reports will both be used to gauge consumer overall economic strength which could be a catalyst for stocks in either direction. In this article, I will be looking at how stocks typically performed the week after Black Friday, and what that meant going forward.

Week After Thanksgiving

The table below summarizes S&P 500 Index (SPX) returns since 1990 for the week after Thanksgiving, when early holiday shopping data first hits the news. Historically, the week has leaned bullish, averaging a 0.66% gain, versus 0.18% for a typical week.

Plus, 69% of the post-Black Friday weeks were positive, compared to 57% for all weeks. I thought there might be higher volatility due to reactions to retail shopping data, but the standard deviation has been less than the norm. 

If you would like to make a short-term bet next week, it’s best to hold off until late Monday to get involved. Cyber Monday has been an awful day for the SPX, which averaged a loss of 0.26%, with just 40% of the returns positive.

In fact, 10 of the last 13 Cyber Mondays have been negative. The rest of the week looks better, with Wednesday and Friday standing out as the best days, the latter averaging a 0.55% gain with 77% of the returns positive.

What About Longer Term?

Since Black Friday and Cyber Monday are often treated as an economic gauge, I wondered whether the market’s reaction to those results could indicate what’s ahead. The table below breaks down the SPX’s next three-month performance based on how much the index moved during the post-Thanksgiving week. Historically, stronger performance next week has lined up with stronger returns afterwards.

Going back to 1990, when the SPX gained at least 1% after Thanksgiving week, it went on to average a 3.9% return over the next three months, with 77% of the returns positive. When the week was flat (up or down less than 1%), the index averaged a 2.4% pop, with 56% of returns positive. But when the week was negative, it averaged a 4.1% loss over the next three months, with only 33% of the returns positive.

This indicator does not work when you shorten the time frame, with the table below summarizing SPX returns for the rest of the year. When post-Thanksgiving week was down 1% or more, the SPX gained 1.6% for the year, with 83% positive. When the week after Thanksgiving was up by 1% or more, it gained 0.52% on average, with 69% of the returns positive.

You can see from the table below that the SPX has typically performed well for the rest of the year. One theory might be that other factors are at work during the few weeks of the year (tax strategies, end-of-year portfolio adjusting, etc.), with the indicator playing out after that.

Notable Stocks for Next Week 

Finally, below are some SPX retailers and other stocks relevant to the holiday shopping season. The table summarizes how these stocks have performed during the week after Thanksgiving over the past 10 years.

The first two on the list, Hewlett Packard Enterprises (HPE) and CME Group (CME), are notable as the only two SPX stocks positive every single year. Ross Stores (ROST), Nike (NKE), and Target (TGT) are some retailers that have tended to be positive next week, while major retailers Amazon.com (AMZN) and Walmart (WMT) are near the bottom of the list, alongside Walt Disney (DIS).