- Nov. 30, 2021
-- The holiday-shortened week ended with a bang, as news of a new COVID-19 strain overseas sparked worries over potential renewed lockdowns, with equity markets enduring the steepest daily decline in two months. Thin holiday trading volume likely exacerbated the reaction, but this is a reminder that despite the recent rally and still-favorable fundamental outlook, pandemic and policy uncertainties still pose credible risks to the market's tranquility in the near term.
Even with last week's dip, it should not be lost that equities are up sharply so far this year. If the S&P 500 were to finish at this level, it would be the fifth-best yearly gain in the last two decades. Thanksgiving marks a turn into the homestretch for the year and shifts the attention to the holiday shopping season.Post-Turkey Track Record: No Nap Required
Consumers Have a Full Plate
- The stock market has historically done well after Thanksgiving. Since 1950, the S&P 500 has risen by an average of 1.5% in December, logging a post-holiday gain more than 80% of the time. And when the market rose between Thanksgiving and year-end, three-quarters of the time it went on to deliver a gain in the following year.1 In other words, a positive finish to the year has often set the table for a continued move higher.
- Going back to 1950, the market has come into Thanksgiving with a year-to-date gain of 20% or more 19 times, including this year. The average return in the following year was more than 18%1. This demonstrates that strong years don't have to be followed by disappointing ones.
Sources: 1. FactSet, S&P 500 Index total return. 2. Atlanta Fed Wage tracker.
- Thanksgiving has historically ushered in the holiday shopping blitz with Black Friday. While still an important (and symbolic) day, consumer-spending habits have evolved, including increased online shopping as well as holiday sales outside of the traditional Thanksgiving-to-Christmas window. While supply-chain disruptions could lead shoppers toward in-stock items at physical stores this year, we think overall spending will see a healthy increase. The National Retail Federation (NRF) is forecasting an 8.5%-10.5% increase in holiday sales this year, compared with 2020.
- The latest reading shows the personal savings rate is 7.5% (savings as a % of disposable income), the third-highest rate coming into Thanksgiving in the last quarter century.
- At 4.2%, wage growth is now the highest it's been since Thanksgiving of 2007, providing additional fuel for consumers2. Looking back over the last 25 years, when wage growth was above 4% and accelerating, GDP growth averaged 3.2%, compared with an average of 2.5% over the entire period.