Can We Expect Another Black Friday Rally?

Recent history suggests that stocks always get a nice boost from Black Friday. Will it happen again this year with stocks already at all-time highs?
Over the last five years, the S&P 500 has risen an average of 4.4% in the month that follows Black Friday. Even in 2008, during the depths of the U.S. recession, the market got a nice 2.5% bump from the busiest shopping weekend of the year. Given that history, a market boost in the next month seems like a foregone conclusion.
This year, however, could be different.
For starters, there’s seemingly not much room left for stocks to climb. All three major U.S. indices are at or near all-time highs. The S&P 500 is currently trading at close to 20 times trailing earnings, higher than at any point since January 2010.
Another factor working against a Black Friday rally is this year’s rather modest sales expectations. Last year, Black Friday sales grew 13% from 2011. In 2011, sales were up 16% from the previous year. This year retailers expect a mere 3.1% increase from 2012 sales.
Although in-store sales declined slightly last year, that was more than offset by a 20.7% increase in online sales. Cyber Monday – the Monday following Thanksgiving – has become an extension of Black Friday weekend. On that day last year, sales grew 4.3%. That number is expected to dip to 3.7% growth this year.
If Black Friday sales are as underwhelming as predicted, Wall Street may not react well. At this point, investors may need to be truly wowed for the usual Black Friday rally to occur.