The day after Thanksgiving, or Black Friday, is usually reserved for shopping for consumer goods and not for stocks. The market is open for only half of a trading session, closing at 1PM. Volumes are typically quite muted as skeleton crews at major institutional firms mean that traders are often on the couch sleeping off the turkey instead of at their desks trading stocks.
Black Friday comes with its own unofficial economic data point as the most important shopping day of the year. Given that consumer spending accounts for nearly 70% of gross domestic product, this large shopping day contains extra importance.
Given that light trading volumes can lead to outsized equity market moves, I thought it would be wise to take a historical look at moves in the S&P 500 (SPY) on the day after Thanksgiving.
The S&P 500 went to its current 500 constituent form in 1957, and since that year, the S&P 500 has produced an average return of 0.36% on the day after Thanksgiving, roughly twelve times the average daily return for the index of 0.03%.
In addition to producing a higher average return, the day after Thanksgiving is also more likely to produce a positive return. In all trading days over the past fifty-six years, there has been roughly a 53% chance that the broad equity market gauge would produce a positive return on any given day. Since 1957, the day after Thanksgiving has produced a positive return on 42 out of 56 occasions, or three-quarters (75%) of the time.
What does this mean for equity markets today? Probably nothing. It could be that the Black Friday alpha will reduce over time as the sample size lengthens. However, this historical precedent might mean that buying stocks today will turn out to be a better endeavor than buying the toy-du-jour or that discounted television. At least you won't have to get up early and wait in line.