The Black Friday Deal You Haven’t Seen Yet
The numbers from last weekend’s holiday shopping are in…
And baby, they’re big.
Most “experts” will assume this is positive news.
But lurking beneath the surface is an important message — one that might change how you invest.
For a transcript of this video, see below. This transcript has been lightly edited for length and clarity.
The Black Friday Deal You Haven’t Seen Yet
Ever wonder why they call it “Black Friday”?
For most of the year, retailers aren’t profitable. They operate in the red.
But the day after Thanksgiving, consumers spend like crazy. As a result, companies often take in so much cash that it vaults their profitability into the black.
How did this year’s spending frenzy turn out?
In a word: encouraging.
According to Adobe, consumers spent nearly $10 billion on Black Friday alone. That’s up almost 8% compared to last year.
Spending continued over the holiday weekend. Between Black Friday and the following Monday — often referred to as “Cyber Monday” — consumers spent $38 billion, up $3 billion from a year ago.
These figures are staggering. They’re about double what the experts projected.
So, we have cause for celebration, right?
As it happens, a different takeaway is lurking beneath the surface…
One that might change the way you invest.
Why Holiday Shopping Matters
First though, let’s take a step back. Why does holiday shopping matter so much?
Short answer, it will determine if we experience a market rally to close out the year.
Since September, I’ve told you to be long and strong in this market. And we’ve already climbed 6% since early fall.
Going forward, I think the market will continue to rally — but not entirely because of holiday spending habits.
Goldilocks and the Rallying Markets
Perhaps surprisingly, strong consumer spending is actually bad for the stock market. It points to a strong economy, which signals to the Fed that its job of raising rates to curb inflation isn’t over. The stock market doesn’t like that notion.
But in a unique scenario, I’m forecasting a sort of Goldilocks outcome. Let me explain…
You see, I expect the strong spending we saw last weekend to fade. In fact, I expect it’ll land in a sweet spot…
One that still partially props up the economy, but that also signals that not everything is truly rosy. This will enable the Fed to continue down its path of halting rate hikes, or even preparing for rate cuts early next year.
A Misleading Statistic
Now let’s circle back to why the recent holiday spending numbers aren’t what they seem.
It has to do with this chart from Bloomberg:
This chart shows sales results for several retailers on Black Friday. The dots represent the retailers, and those above the center line saw increased sales compared to the same time a year ago.
Notice that a number of companies are below that center line. That means sales were down compared to last Black Friday. And keep in mind, a lot of these companies rely heavily on Black Friday to get them into, well, the black.
Now take a look at the arrow on the left-hand side. I’ve singled out Amazon on this chart because this company was the big winner this past weekend.
That may not be shocking to many of you. But it’s important to understand that, as Amazon’s sales climb, fewer sales are going into the pockets of other retailers.
The Opportunities Others Miss
This is what enables us to discover investment opportunities that others can’t see.
In this case, retail looks like a strong, bullish sector, especially in light of the billions spent this past weekend.
But remember: Amazon is the real winner here, while other retailers are still stuck in the “loser” category. That means that simply throwing money into the retail sector isn’t a smart idea. You need to take a more targeted approach.
Could you invest in Amazon? Sure. That’s a sensible pick for any portfolio. But the e-commerce company is already a giant. Its stock isn’t likely to grow by 10x or even 2x — at least, not any time soon.
Instead, focus on the struggling retailers, ones we can bet against and position ourselves for double- and even triple-digit gains.
If you’re a Moneyball Pro subscriber, I’ll share the details of my favorite floundering retailer, one that gives us a chance to earn returns of more than 250%.
We’re in it to win it. Zatlin out.
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