Thanksgiving in the U.S. means the beginning of preparations for the winter holiday season, which causes stocks to rise from November 24 through Christmas on December 25, after which the entire civilized world goes on a well-deserved vacation. Black Friday is traditionally considered the second "special" day after Thanksgiving for investors. Such a phenomenal growth of stocks in the traders' circle is called the "December effect. Unlike in the CIS countries, buyers in America and Europe get the biggest discounts not only on goods, but also on free shipping, which strongly influences the market price fluctuations on the stock exchanges. Sale days have a telling effect on the economy because it is one of the most important retail and consumer spending events in the U.S.
In 2005 a National Retail Federation employee "gave" consumers Cyber Monday, which differs from Black Friday in its emphasis on online shopping. Both of these days show crucial values for annual business performance, and investors look to sales data on these days as a way to gauge the overall health of the entire retail industry.
In 2022, Black Friday and Cyber Monday numbers have distinguished themselves from previous years. Even the COVID-19 pandemic, the U.S.-China trade war (2018-2019) and other supply chain difficulties could not raise global inflation as much as the Russian invasion of Ukraine. Fuel prices, electricity prices, bank interest rates, and housing markets began to rise around the world.
The year 2023 has just begun, but data from last year showed that despite the negative forecasts of analysts, consumer spending was higher than expected and the stock market value of companies like Amazon, Walmart, Apple, Boeing and others only increased in value. This state of the market turned out to be favorable for investors, which eventually led to a rise in stock indices. As a side note, the positive sentiment that prevails in the market during the winter season is often referred to as a "Santa Claus rally" or "New Year's Day rally.
Without going too deep into history, the main reasons of growth of indices and other assets are as follows:
- market liquidity is decreasing as both top bank and hedge fund managers and regular clerks go on vacation;
- pre-holiday sales significantly boost consumer demand fundamentals, thereby lowering inflation;
- investors are buying retail stocks, which won't report until next quarter.
We shouldn't forget the other, less pleasant December worries, called the "January effect." This is when the annual U.S. tax period ends, and investors want to optimize their tax base by selling stocks at the end of December and buying them back in early January. This year, January has been a rising month, and has set a positive trading trend for 2023.