All the factors are in place for the holiday shopping season to kick off with a serious bang for retailers, which could ignite their stock prices weeks before Christmas.
The unemployment rate is at a 50-year low. Job growth has been solid all year long. Wages continue to be on the rise. Consumer confidence has rallied back from the summer when recession talk permeated the internet. At 8.3%, the personal savings rate is at its highest level since 2012, according to the St. Louis Fed.
Take those macroeconomic factors together, and you get a portrait of the U.S. consumer that is healthy by every technical definition. Not to mention the major stock market indices have notched impressive double-digit percentage gains on the year.
People have money.
And then there are the intangibles coming into this particular holiday season that could send shoppers out in droves this Black Friday and Cyber Monday.
No major storms across the country that would keep shoppers out of the malls on Black Friday and the weekend are being discussed. Most veteran retail experts Yahoo Finance have talked with have also pointed out more compelling discounts by retailers in stores and online versus last year. Moreover, there are only 26 days between Thanksgiving and Christmas this year compared to 32 days in 2018. That alone could spur a flood of shoppers on Black Friday right through Cyber Monday.
The early sales numbers could easily surprise to the upside, ProShares global investment strategist Simeon Hyman tells Yahoo Finance. Hyman oversees several retail focused ETFs for ProShares.
If Black Friday and Cyber Monday sales do come out strong, it could provide a strong bid under retail stocks. Why? Simple — the sales would have beaten some pretty lofty projections before the shopping season even kicked off.
Cyber Monday sales are seen rising 19% from the prior year to $9.4 billion, according to Adobe Analytics. Black Friday online sales are projected to rise 20.3% to $7.5 billion.
Overall holiday season sales are expected to increase as much as 4.2%, per the National Retail Federation.
In short, the strength of the consumer wouldn’t be priced into many names in retail — especially in the wake of third quarter earnings duds this month from Macy’s and Kohl’s causing concern in the lead-up to the holidays. The VanEck Vectors Retail ETF is up a cool 26% year-to-date, but has lagged the S&P 500 by about 2% over the past month due to the aforementioned sour retail earnings reports.
“I think you pop [in the stocks] as people cram in shopping in the compressed time period,” adds Hyman.