The Best Time to Buy Stocks After Black Friday

Don't buy stocks on Black Friday or Cyber Monday

Senior Quantitative Analyst
Nov 22, 2017 at 7:00 AM
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With retail stores opening on Thanksgiving, Cyber Monday becoming a thing, and websites running deals all weekend, Black Friday doesn't seem as momentous as it once was. In any case, it's a telling time for retail stores -- and retail stocks. News reports of lines and fist fights will emerge later this week, and they will be used to gauge consumer strength and the economy, in general. This made me curious about what happens to the S&P 500 Index (SPX) the week after Black Friday, and if that reaction can tell us about the stock market going forward.

Post-Black Friday SPX Returns Tend to Be Bullish

The table below shows how the S&P 500 has performed in the week after Black Friday. It's generally a bullish, low-volatility week. The average return after Black Friday outperforms other weeks due to a higher percent positive and an average loss that is lower than usual.

 sp500 returns week after black friday

Historically, this doesn't mean buy stocks on Black Friday. Wait until later the next week. For whatever reason, the Monday after Black Friday -- Cyber Monday -- has been awful for stocks. The S&P 500 has averaged a loss of 0.33%, with about 41% of the returns positive on Monday. Thursday has been even worse than Mondays.

On the other hand, Friday of next week has shown extremely bullish results. More than 80% of the returns have been positive, with the S&P 500 averaging a gain of 0.63%. In fact, the last five Cyber Mondays have been negative, while the last five Fridays after Black Friday have been positive. 

sp500 daily returns after black friday

The Black Friday Stock Market Indicator

What if we use the week after Black Friday as an indicator? The theory would be that the stock market reaction to one of the most important shopping weeks of the year can predict the market direction over the next few months.

The table below shows how the S&P 500 does in the three months after Black Friday, depending on whether the index is up or down in the week after Black Friday. It supports the theory suggested above. When next week has been positive, the S&P 500 averaged a 3.82% return over the next three months. When the week after Black Friday has been negative, it has averaged a loss of over 1%.

sp500 3 mos returns after black friday


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