The “Thanksgiving Effect” on the Markets

Alpesh Patel|November 25, 2023

Happy Thanksgiving, Manward family! I’m wishing you all a peaceful, joyous time with your families… and for those who cannot be with their loved ones, I’m thinking of you.

Call me market-obsessed, but the market these days reminds me of Thanksgiving. Ongoing geopolitical tensions, inflationary pressures and central bank monetary tightening policies have led to heightened market volatility… akin to the real and metaphorical choppy seas the Founding Fathers encountered on their way to freedom.

How the stock market behaves around Thanksgiving has long been a subject of interest for investors and analysts. While Thanksgiving is a time for gratitude and family gatherings, it also marks a distinctive period in the stock market calendar.

Over the past 151 years, the S&P 500 has seen an average gain of 0.88% during November, which makes it the third-best month of the year.

Historically, the stock market has shown an upward trend during and following the week of Thanksgiving. It’s known as the “Thanksgiving effect.” It can be attributed to a number of factors, such as increased consumer spending, positive investor sentiment and seasonal trading patterns.

A study by the Stock Trader’s Almanac found that, since 1950, the Dow Jones Industrial Average has risen an average of 0.6% during the week of Thanksgiving. Furthermore, the period from Thanksgiving to the end of the year has seen positive returns 75% of the time, with an average gain of 1.93%.

Right now, the valuations of the S&P 500 and the Nasdaq Composite suggest investors are cautiously optimistic. (That, too, is the American way!)

This is the first holiday season with AI at the forefront. The integration of AI into nearly every sector is transforming businesses and, by extension, impacting market dynamics.

The retail sector, for instance, is using AI to revolutionize shopping experiences by enabling personalized recommendations and efficient supply chain management. This technological advancement could lead to more efficient holiday shopping seasons, potentially boosting retail stocks even further during this time of year.

Despite the challenges we’ve seen this year, there is an underlying resilience in the market, driven by strong corporate profits.

Resilience is the word Thanksgiving calls to my mind. I think of the American spirit and the markets… which are, after all, an embodiment of America in many ways.

Americans have much to give thanks for: an optimistic outlook for corporations… the end of the pandemic… the avoidance of a recession… and the largest economy in the world, which spews out trillion-dollar businesses.

And as those businesses benefit from an optimistic outlook and a strong end-of-year trend… we’ll welcome the holiday season and the promise of profits ahead.