Black Friday, what impact will it have on the market?

23.11.2022 12:16|Conotoxia Ltd Analyst Team

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This coming Friday (25.11) is Black Friday, which is the colloquial term for the Friday after Thanksgiving in the United States. It traditionally marks the start of the pre-Christmas shopping season in the United States. Historically, it has kicked off one of the best months for retailers. However, let's examine how the markets have reacted to this time and how this year may unfold.

Historical market behaviour

According to data from the seasonax platform, on average for the period from 15 to 30 November for the last 37 years (since 1984), the main S&P 500 index (US500) has risen by an average of 0.64% (24 times) which would give a historical performance of as much as 63%. For the uptrend periods, the average gain was 4.44%, and the average loss was -5.55%. The maximum increase was in 2012 and amounted to approximately 15%, while the largest loss occurred in 1987 and amounted to -13%. Interestingly enough, that same year we saw the market collapse later called 'Black Monday'.

Comparing this to the later period from the beginning of December to the end of the year for the same years, the index grew by an average of 3.69% (an efficiency of 64%). The average increase was 8.79% and the average loss was -5%. The maximum increase we could see was in 1991, which was 23.53%, and the largest loss of -12% was seen in 1996. 

It seems that historically for the stock market this period may have been one of the best for investment. Given the data presented and the current price of the S&P 500 index at 4,000 points, we could see a change in price by the end of the year with about 64% probability to levels around 4148 points, with an average increase to around 4352 points and an average decrease around 3800 points.

Source: Conotoxia MT5, US500, Weekly

What can we expect in the current year?

More often than not, the declines in these periods were during the year when there were financial market crises. For example, we could see falls of more than 5% in 2007 (real estate crisis), 2002 and 2003 (years after the "DOTCOM" crisis), 1986 (Black Monday gold market collapse).

The best periods almost always seemed to be linked to a good performance year for the companies. We saw increases above 15% in 1999 (the year before the 'DOTCOM' crisis), 1990 (the year before the severe US drought), or 1985. 

It seems that with the current situation of rising interest rates, high inflation, or falling corporate earnings, it would  be hard to expect more positive scenarios. It seems that customers this year, faced with rising borrowing costs or rising product prices, may not seem as willing to spend as much as they did in times of prosperity. Therefore, we might see little change in the index or even declines. 



Grzegorz Dróżdż, Junior Market Analyst of Conotoxia Ltd. (Conotoxia investment service)

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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