How Important Are Holiday Sales To The US?
Believe it or not, it’s already that time of year again. Thanksgiving is this week… which means Black Friday is almost here. Yep, the holiday season is upon us and it’s time for America to go shopping.
But, the holidays aren’t just about presents, family time, and cheesy music (which is always playing no matter where you go). It’s actually an extremely important period for businesses and the economy as a whole.
Here’s the thing…
Retail spending drives the US economy.
The fourth quarter is a time when several retail businesses generate half or more of their annual revenues. Plus, many companies save a huge portion of their marketing budgets just for this time period.
More importantly, consumer spending historically represents 70% of GDP.
It’s not big business building a fancy, new manufacturing facility. It’s not even the government constructing an aircraft carrier or paving highways. It’s the family going to the mall on Saturday that drives this economy.
Think about it…
If a company has a good holiday season, they have more money to expand. That could mean new products, new facilities, or new businesses in the coming quarters. Regardless, it means more hiring and more spending.
The more people getting hired, the more money consumers have to spend as well. And so the cycle continues, consistently pumping up the economy in the process. But it all starts with holiday spending.
Moreover, it’s not just the retail companies that benefit. Think about shipping companies for instance. Any company thriving from shipping or transportation is bound to get a boost during this period as well.
In other words, equities could get another big push in the coming weeks. As such, it’s a good idea for savvy traders to pay attention to all the retail and sales data soon to be released. In particular, Black Friday and Cyber Monday could set the tone for a big holiday shopping season.
For options traders, buying ATM calls on some retailers or selling OTM puts on others could both be effective strategies. For call buyers, you can often find cheaper calls on the less volatile retailers. For higher volatility stocks, selling puts may be the way to go.
Yours in Profit,
Gordon Lewis
Category: Options Trading, Stocks
