By Paul Quintaro
According to various reports, Black Friday 2011 was significantly more successful than Black Friday 2010.
The National Retail Federation reports that retail sales jumped 16% from the prior year, and shoppers spent on average roughly $35 more per person.
The trend in online retail was even more successful, as online retail sales jumped over a quarter—up 26%.
The NRF claims that longer hours and better deals were the primary catalyst behind the successful figures.
Equity futures rallied sharply Monday morning, although rumors of an IMF bailout of Italy may have been more pertinent to the move than rosy retail sales. Perhaps as evidence, the euro traded up on Monday, as the US dollar index moved slightly lower.
Still, does a successful Black Friday provide an effective counter to market bears arguing that a double-dip recession is incoming?
Perhaps not. Market commentator and noted blogger Barry Ritholtz argued in a post on Monday morning that retail sales for Black Friday have a history of being greatly exaggerated.
Ritholtz states that the 16% climb in sales is based on faulty data and that the claim is outrageous. He states that, at most, retailers can show a modest increase in foot traffic, but the data is not there to demonstrate a jump in sales.
Ritholtz also targets figures given by ShopperTrack (which were less aggressive and therefore less cited) claiming that the methodology used to arrive at their 6.6% jump in retail sales lacks the ability to make that forecast. As Ritholtz notes, ShopperTrack only had the ability to measure foot traffic, and therefore any claims of a jump in actual sales was a potentially faulty extrapolation.
At any rate, even assuming that the sales figures are accurate, larger questions remain.
Can the US consumer maintain these elevated spending figures? Further, are these spending figures even indicative of any real economic growth? In 2008, Black Friday sales came in particularly well, yet that did not stop the market meltdown experienced in the months surrounding those shopping days.
Traders who believe that retail sales figures demonstrate a bullish trend for the broader economy might want to consider the following trades:
- Go long a broader equity index like the S&P 500. The market has been beaten down on Eurozone fears, might rally back from here if the US consumer can keep the economy moving forward.
- Short defensive plays like utilities or healthcare stocks. Money may have flowed into these traditionally defensive positions on fears of a meltdown. If the economy is growing, investors may shift their holdings out and into riskier positions.
Traders who believe that Black Friday figures are inaccurate or misleading may consider alternate positions:
- Short small cap stocks. Small caps generally fall more aggressively than larger cap stocks in times of distress.
- Short commodities. Commodity futures rallied sharply on Monday, but could pullback in the event of a market downturn.
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