Making sense of market moves
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Americans may not want to spend the night camping out in strip mall parking lots and getting into brawls just to snag the best sales, but they are ready to spend record amounts of cash.
According to the National Retail Federation, holiday spending is expected to grow 2.5% to 3.5% from 2023, rising to somewhere between $979.5 billion and $989 billion. That’s much higher than the $955.6 billion spent during the same time period last year.
“Consumers appear to be in tip-top shape heading into the year’s premiere shopping season around the holidays,” wrote Chief of Investment Strategy & Research at Glenmede Jason Pride.
Today will be a highly watched bellwether for spending over the rest of the holiday season. “With Black Friday just around the corner, retail traffic volumes from Thanksgiving through Cyber Monday are likely to give an advance indication of the ongoing resiliency of households in the US,” Pride added.
Your stocking stuffers just got cheaper
But retailers still face a number of hurdles this season, including persistently high prices, macroeconomic uncertainty, and time constraints—literally. There are actually five fewer days between Thanksgiving and Christmas, a fact that BofA believes will cut into retailers' festive profits.
Some retailers have also felt the sting of slower consumer spending in specific areas. Best Buy announced worse-than-expected earnings earlier this week, but the cherry on top was management’s forecast that discretionary spending on expensive gadgets and gizmos will remain weak through the holidays.
Analysts believe that bargain shopping will be the name of the game this season. “It seems that holiday shoppers will be more frugal this year as multiple years of high inflation and high interest rates have taken a considerable toll,” explained Bankrate analyst Ted Rossman.
In response, big-box retailers have unveiled huge markdowns to woo customers. That may help revenue in the short term, but in the long run, too many sales can do some serious damage to bottom lines.
Still, if that means we get a discount on that sweet toilet bowl nightlight we’ve been keeping our eyes on, we’ll take that deal.—LB