During the holiday season, the activities and schedules of Americans tend to change as people increase their shopping and take time off to gather with friends and family to celebrate. And the quirks of the holidays impact the financial industry too, as many investors leave work behind to take an extended break from typical trading routines and analyzing the markets.
Some investors see the time between Thanksgiving and New Year’s Day as a time to relax and recharge. In contrast, many traders see the season as one where they can work hard and make some strategic gains in the market, perhaps taking advantage of the period when many other traders take time off. Here’s a look at how the holiday season can affect the stock market, which can help you navigate the season no matter what kind of investor you are.
Stock Trading Volume and the Holiday Season
There is generally lower stock trading volume during the holiday season, as both professional and retail traders take time off from the markets. But that doesn’t mean there is no trading activity. And since fewer traders participate in the markets, stock prices can be more volatile than usual because there are fewer buyers and sellers to ensure liquidity.
For traders interested in making short-term gains during the holidays, this increased stock volatility may present potential opportunities to take advantage of market fluctuations.
And just because stock trading volume is lower doesn’t mean the market is completely quiet. If there’s political or economic news, it can still move stocks; paying attention to news events during the holidays may help you take advantage of subsequent price movements.
The Holiday Effect
Some traders may be interested in the holiday effect (sometimes called the pre-holiday effect), a supposed phenomenon that sees stock prices drop in the days leading up to a holiday and then rebound on the trading day right before the holiday. Proponents of this pattern say it is most commonly seen around Thanksgiving and Christmas, but can also happen around other holidays.
There are a few theories as to why the holiday effect may occur. One view is that many people take time off around holidays, so there are fewer traders in the market, and it exacerbates market fluctuations, as mentioned above. Another theory is that holidays tend to be associated with family and relaxation, which may make people more risk-averse and less likely to buy stocks.
The holiday effect is one of several market anomalies, called calendar effects, that traders may try to exploit to make gains. However, the holiday effect and other calendar effects, like the January Effect, are not hard-and-fast rules that predict the movement of stock prices; just because this phenomenon has happened before does not mean it will occur before every holiday.
Generally, calendar effects are a psychological tool traders may use to influence decisions, but they should not be the main reason a trader makes investment decisions.
Still, the holiday effect is something that traders should be aware of; if you’re planning on buying or selling stocks around a holiday, it’s important to keep this phenomenon in mind.
Thanksgiving and Black Friday Stock Market Trends
For both traders and long-term investors, the shopping period from Thanksgiving to Cyber Monday (the Monday following Thanksgiving) can play an essential role in the market and the broader economy. This period is typically considered the most significant retail spending extravaganza of the year in the United States — and investor confidence can hinge on whether or not spending predictions made were met or exceeded. These retail sales can be an important economic indicator.
If Black Friday weekend results are good, it could lead to a spike in retail stock prices. When results come in below expectations, concerns can arise that consumers are tightening their wallets, which can negatively impact the stock market.
The actual Thanksgiving Day and Black Friday effect on stocks isn’t instantly apparent, since the stock market is closed on Thanksgiving Day and is only open until 1 pm on Black Friday.
But, when stock market activity returns to regular hours after the Thanksgiving weekend, large numbers of investors will look at sales numbers to determine the health of the country’s retail industry and perhaps adjust their buying and selling strategies accordingly.
But investors can’t always expect Black Friday performances to predict how the retail stocks or the stock market will react when it reopens. In 2021, for example, the National Retail Federation (NRF) estimated that 179.8 million people shopped, either online or in stores, during the five-day holiday period from Thanksgiving through Cyber Monday. This beat the initial estimates by more than 21 million. However, the S&P Retail Select Index (SPSIRE) declined 6.9% the week following the holiday, while the S&P 500 fell 2.5%.
Nonetheless, paying attention to the retail sales following Thanksgiving weekend can help investors gauge the strength of the consumer during the holiday season, which may be reflected in stock prices for the rest of the year.
The Takeaway
If you’re planning to do any holiday trading, be sure to approach it with caution. Though there can be opportunities to make money during the holidays, it can be a tricky time to trade stocks. And if you’re not comfortable with the level of volatility, it may be best to sit on the sidelines. Remember, there will always be another opportunity to trade.
For long-term investors, the holiday season may be a better time to rebalance your portfolio by the end of the year rather than look for trading opportunities to make short-term gains.
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This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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32 ways to celebrate the holidays affordably
The holiday season is a popular time for Americans to go all out with their spending. They shell out an average of $1,000 to $2,000 on gifts alone. And that doesn’t include spending on parties, decor or travel.
There are so many expenses that need to be taken into account during the holidays, but you don’t need to overspend for top-of-the-line gifts and experiences to enjoy the season.
Here are some ideas to help you celebrate the holidays affordably.
Related: Creating better buying habits
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Before spending any money, come up with a realistic budget for gifts, decorations and experiences this holiday season. You’ll be able to prioritize your spending in advance and identify where you can make cuts.
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By making purchases with cash instead of plastic during the holidays, you could end up spending more thoughtfully. Try the cash envelope system to help you stick to your budget. All you do is create a few different envelopes for spending categories like holiday meals, decorations and experiences, and then put the cash for each into the envelopes. When you run out of cash, it means you can’t spend any more money in that category (or you have to dip into the budget for another category).
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While you may prefer to cook everything yourself for holiday meals, hosting a potluck and asking your friends and family members to bring food to a holiday meal is a good way to cut costs on your grocery bill. It could also be fun to sample everyone’s cooking. Just make sure that you ask people ahead of time what they plan to bring so that you have enough food and options for everyone.
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If you are hosting a meal, choose some foods that are on the cheaper side to save money. For instance, if you celebrate Hanukkah, you could make latkes, which only require potatoes and onions, plus some sides like applesauce and sour cream. More cheap Hanukkah meal ideas include fried chicken and donuts. If you celebrate Kwanzaa, try cooking some buttermilk biscuits and plantains. For Christmas, pigs in a blanket and yule log cakes are both fun and affordable.
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There may be an area near you that’s known for looking spectacular at Christmas time. Hop in the car with a friend and tour the local Christmas decor for a festive, free night out.
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Instead of doing a Secret Santa gift exchange with presents, get together some friends, colleagues or neighbors and do a cookie swap instead. Before committing to making any cookies, be sure to ask everyone in the cookie exchange if they have any food allergies.
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This is a great free holiday activity to do with the kids. Go to the library, take out some holiday books you loved when you were a kid, and then reread them to your children during the holiday season. You’ll get to reminisce about the past while sharing your childhood with your family.
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Search YouTube for the best holiday tunes to boogie down to with your friends and family. Of course, Mariah Carey’s “All I Want for Christmas is You” has to be on your playlist.
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The dollar store is full of cheap holiday decorations as well as goodies you can put into gift bags or stuff into stockings. You can find low-cost ornaments, lights, balloons and more to make your home more festive for the season.
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If you already subscribe to a streaming service, you’ll find plenty of holiday movies featured come December. Look for classics like A Christmas Story, National Lampoon’s Christmas Vacation, Scrooged” and Home Alone to get started. Pick up some microwave movie theater popcorn and you’ll have a fun, cozy night in with all your favorite flicks.
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A custom playlist is a classic thoughtful gift for friends and family. Now that most music is available online, it’s easier than ever. Just create a playlist on Spotify, name it, and then share the link. They’ll be sure to appreciate the tunes!
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Your town likely hosts lots of free and/or cheap events you can partake in during the holidays. Search for Christmas tree lightings, concerts, parades and outdoor movie nights, which are usually free or low cost.
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What better way to celebrate the holidays than to give back? Look for local opportunities to volunteer at a soup kitchen or work with the homeless and hungry in some other way this year. Your community will benefit from your kindness, and you’ll feel great for volunteering.
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Another way you can give back — and get the entire family involved — is to donate toys your kids no longer use to children and families in need. Search for local toy drives happening in your community to find the best place to donate them to.
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The average Millennial will spend $228.10 on New Year’s Eve. If you don’t want to spend hundreds of dollars on one night out, then crowdsource a New Year’s party at home. You can invite over a few friends and have a potluck, or order in some pizzas and have everyone split the costs. Turn on the TV and watch some movies, bust out the holiday playlist and have a dance party, or sit in the front of the fireplace and drink hot cocoa.
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If you can’t be with your friends and family members in person on the holidays, then host a Zoom party. Everyone can pour themselves a glass of something and catch up without spending anything on travel.
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Have some board games in your closet? Or maybe you have access to online games on your television? Invite over your loved ones and host a game night. Buy some cheap snacks like popcorn, chips and pretzels, and pair them with soda and bring-your-own beer to stay on budget.
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Groupon is home to some amazing deals, and during the holiday season, the site may offer discount codes on experiences as well. Look for local holiday events in your local area, or get creative and gift a discounted experience to a friend.
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Do you have credit card points racked up? Then the holiday season is the time to use them. You may be able to use your points to purchase gifts as well as book hotels and flights.
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Instead of spending thousands traveling on a plane to some exotic location, stay home and explore your town, or take a road trip to a local destination. If you bring friends along, you’ll have more fun — and you can split the cost of gas and food.
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E-cards are free or cheap, making them much more affordable than traditional holiday cards. Show your family and friends that you’re thinking about them by sending them a personalized e-card leading up to the holidays.
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Ask your loved ones to bring over their own prepared cookie dough, and then give out the supplies to decorate the cookies, such as sprinkles and icing. The finished cookies can even be used as small holiday gifts!
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If you log onto Pinterest, you’ll find a number of DIY holiday decorations you can make yourself for a fraction of the price of store-bought. For instance, you could create a wreath out of old wine corks or string up popcorn on your Christmas tree. Make sure to ask your family and friends to join in on the fun.
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Thrift stores sell holiday decorations and cards at much lower prices than a typical retail store. Go to your local Goodwill, Salvation Army or other local thrift shops to find great deals.
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Many times, churches, synagogues and other houses of worship will host holiday celebrations for free or a donation you can afford.Whether you’re attending formal services or a special holiday event, you’ll be sure to meet people from your community and make new friends.
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Look up the rules for playing dreidel and then host a dreidel competition at your house. Remember to whip up some latkes and donuts for the Hanukkah celebration and to create prizes for the winners. (Don’t worry: Simple items from the dollar store should suffice.)
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You can find a cheap advent calendar at the store — or make your own — and then use it to count down every day to Christmas with the kids. You can’t go wrong with a traditional candy advent calendar, but those with large collections of holiday-themed books can also try a book-a-day countdown.
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You can construct some great gifts at home without having to spend much on materials. For example, you could make a family cookbook containing recipes and fun stories about the person they came from. If you sew, you could whip up embroidered items like handkerchiefs or tote bags, or if you’re a whiz in the kitchen, you could make jams, jellies and more!
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You may have saved up holiday cards over the years. Now is the time to break them out and decorate your home. When you look around, you’ll have fond memories of past holidays (and a reminder to send your own cards this year).
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Ugly holiday sweaters are officially a thing, and donning one might help you keep your thermostat lower come heating season! Find a goofy sweater online or at a discount store to wear proudly throughout the holiday season. Better yet, break out the one that your grandma made when you were a kid (if it still fits, of course).
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An artificial Christmas tree will likely cost more upfront than a real tree, but it’ll last you for years to come. Even if you shell out $300 on a fake tree, if it lasts for 10 years, that’s $30 a year. When compared to the average cost of a live Christmas tree — $112.63 — the savings are clear.
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If you put off shopping until the last minute, you’re much more likely to blow your budget. Schedule time to shop before the holiday season is in full swing to help you avoid the overspending trap.
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The holidays can be expensive, but they don’t have to be. Focus on spending time with friends and family, investing in your community, and exploring your D.I.Y. side to get the most out of the season while spending the least.
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This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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