Downplaying Black Friday [SPDR Series Trust, SPDR S&P Retail (ETF), Vanguard Consumer Discretionary ETF]

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November 28, 2014 1:15pm NYSE:VCR NYSE:XLY

Black FridayRon Rowland: This week marks the beginning of the sprint to the finish line of 2014.  Yesterday, our country held its annual thanks.  Ironically, the day after we give thanks for everything we have, we are encouraged to spend lavishly on gifts and things we do not have.


  What was once a subtle shifting of gears between two holidays has evolved into a clutch popping, tire burning, head jerking start to the year-end spending blitz known as the holiday shopping season.

Black Friday derives its name from accounting lingo.  For many retailers, the day’s sales number is large enough to make them profitable (“put them in the black”) for the year.  To grab a larger share of this one-day spending spree, some retailers started opening earlier than others.

In an effort to one-up their competition, stores gradually moved their opening times earlier and earlier.  Some began welcoming shoppers at midnight, forcing anyone trying to open earlier to do so on Thanksgiving Day instead of Friday.  Some did so, and the media dubbed it Gray Thursday.  However, many consumers have declared enough is enough and are refusing to spend their dollars at these establishments.

The internet is also changing shopping habits, creating bargains in the days leading up to Thanksgiving as well as extending those sales into December.  Brick and mortar stores are fighting back as many have staged pre-Black Friday sales over the past week or more.  News reporting has moved to a constant 24-hour cycle, and it appears retailers would like to do the same.

By most accounts, this year’s holiday shopping season should be quite robust and record-setting.  Third quarter GDP was revised upward to 3.9% from the initial 3.5% estimate from a month ago.  The nation’s average price for a gallon of gasoline has dropped to just $2.81, and consumer sentiment is at a 7-year high.  The weather is always a factor, but anything less than a prolonged polar vortex should not derail the anticipated record spending.

Large and liquid ETFs with holdings affected by this year’s shopping environment include SPDR S&P Retail (XRT), Market Vectors Retail (RTH), SPDR Consumer Discretionary Select Sector (XLY), Vanguard Consumer Discretionary (VCR), iShares Transportation Average ETF (IYT), and SPDR S&P Transportation (XTN).

Although the media will still be fixated on measuring the crowds and dollars spent on Friday, we believe the Black Friday benchmark has become less significant.  It’s the whole fourth quarter that matters – not just one day.

Disclosure covering writer, editor, and publisher:  Long IYT and XLY.

This article is brought to you courtesy of Ron Rowland from Invest With an Edge.


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