Black Friday and Cyber Monday: indicators of global consumer health

Updates 28/11/2019
Tiempo de lectura: 3 minuto(s)

Black Friday and Cyber Monday move retailers from the red into the black. Experts expect that this year sales will continue to rise – an indicator that the economy is doing well. In our interview, Frank Häusler, Chief Strategist at Vontobel Asset Management, explains what this has to do with Trump getting re-elected.


Black Friday is well-known in the US as a very special shopping day which kicks off the Christmas shopping season. On that day – the last Friday of November – retail stores open early and offer huge discounts, generating big crowds and very high sales volume. These stores are often "in the black" (i.e. profitable) that day.

  

How did it get started?

The history of Black Friday started much earlier than people may think. The day after Thanksgiving has been the unofficial beginning of the Christmas season since the late 19th century, when President Abraham Lincoln designated the Thanksgiving holiday as the last Thursday in November. It was natural that the day following this day of rest would initiate a more intensive shopping period that would last until Christmas, about a month later.

But the true story of Black Friday is more dramatic than this. The term "Black Friday" was first used to describe a horrendous one-day drop in the price of gold that took place on Friday, Sept. 24, 1869. Two investors, Jay Gould and Jim Fisk, had been quietly trying to corner the US gold market, and on that day, their manipulation culminated in the gold price collapsing, and the stock market crashing 20% as well. In the weeks that followed, foreign trade came to stop, and farmers suffered a 50% dip in wheat and corn harvest value.

  

We asked Frank Häusler, Chief Strategist at Vontobel Asset Management, about these days with the biggest sales volume in the retail industry:

  

“Black Friday is seen as a 'sentiment indicator', i.e. a sign for how healthy the consumer is.”

Frank Häusler, Chief Strategist at Vontobel Asset Management

  

Frank, is Black Friday really the biggest shopping event of the year?
Yes and no. In fact, the most important single day for retail sales is usually the Saturday before Christmas.

Is Black Friday only a big thing in the US?
Not at all. China has its “Singles Day”, held on November 11th, which sets the records for most online sales in one day. Canadians do it, too; and now Europe is also jumping on the bandwagon. Same story as Halloween and Thanksgiving. And we shouldn’t forget “Cyber Monday”, the first Monday after Thanksgiving: this day is promoted by online retailers as another day of unique bargains.

How important is it for the retail sector and the economy?
Black Friday is seen as a “sentiment indicator”, i.e. a sign for how healthy the consumer is – originally only for the US, but today, as mentioned before, it’s become a global indicator. Black Friday sales are important for equity markets. Only a consumer who is convinced that his job is safe will be going on a spending spree – and that is only the case if the economy is doing well. Should the consumer fail to show up on Black Friday, this might be a sign that the next recession is closer than we think, with the job market already being affected by weaker manufacturing, which then might spill over into the services sector. By far, the most important element of GDP in today’s economies is household consumption (globally around 60%). Interestingly, even “industrial powerhouses” like Germany or Switzerland are also consumer-dominated economies, but compared to the US or the UK, for example, the share of their total GDP accounted for by manufacturing is simply larger.

And what is the outlook for this year’s Black Friday?
Expectations are that retail spending will continue to grow. Retail equities have had a better run this year than the market as a whole, which means that the positive expectations for this Black Friday have to be met, or otherwise the retail sector will be in for a correction. A very strong Black Friday could further support the equity rotation to more cyclical sectors (upgrading banks, downgrading real estate and utilities). If we get a solid Black Friday, stabilizing global growth, a trade deal, and central banks still experiencing a solid tailwind, we might see a nice Santa rally this year.

Does a happy consumer also make a happy president?
I guess you could say that. The US consumer is in good shape, and Donald Trump will try hard to make sure that things will stay exactly like this. A roaring economy and a happy consumer definitely do support his mission to be re-elected in 2020.

  

About Frank Häusler

Frank Häusler joined Vontobel Asset Management’s Multi Asset Boutique in 2018 and is Chief Strategist and Head OCIO and Solutions. He oversees investment strategy and is chairman of the Asset Allocation Committee.