Your Friendly Annual Black Friday Reminder

Good news! Next Friday, we will finally get the US consumer spending report for … September. We are sure it will be interesting and are glad the nice people at the Bureau of Economic Analysis (BEA) are getting government shutdown-delayed data to the masses. But society has already moved on, with news related to November spending hogging headlines Monday: Black Friday projections. A new Deloitte survey shows more Americans plan to hit the sales, but they project spending -4% less than last year.^[i] From this, headlines are drawing conclusions about belt-tightening and a weak economy. Whatever Black Friday/Cyber Monday sales tallies show, it won’t tell stocks anything new.

The focus on Black Friday sales has always been misplaced. It is a big day, yes. But it was only ever one day in the holiday shopping season, which is only one segment of the retail sales world. And while consumer spending comprises the bulk of US GDP, the majority is services. Within physical goods, a big chunk goes to essentials—food, gasoline, toiletries. Discretionary spending is a pretty small slice of the consumer pie. So Black Friday’s scale never matched its headline presence.

Lately, it has become even more watered down. Not because the allure of doorbusters and supposed sales wore off, but because Black Friday morphed into Black Friday weekend, then Black Friday/Cyber Monday, then Cyber Week, then Black Friday Week and Cyber Week. Then came pre-Black Friday, which landed in our personal inboxes as November began. Oh, and who can forget the Black Friday-type discounts in October’s many Anniversary and Friends and Family sales? Our inboxes have seen a steady stream of blanket 20% off and 30% off ads for almost two months now. The madness will continue through December. In this extended season of shopping, one weekend’s projected spending is meaningless.

This year’s added wrinkle of lower projections and consumer gloom doesn’t change this. Yes, the projections for lower spending are novel relative to recent years. But one, they might not pan out. Consumers have a long history of saying one thing in surveys and doing something else when it is time to click “add to cart.” This is why consumer sentiment surveys have never predicted actual consumer spending. And two, even if holiday sales are weak, tapped-out consumers have been a major economic talking point for months.

Think it through. Since April’s tariff announcements, headlines have warned higher costs will burden the American businesses and shoppers who have to swallow them. As we covered last week, so-called K-shaped economy concerns have also reigned, with worries that high-income households are the only force driving spending as most folks struggle. Last week, that manifested in fears about rising auto loan delinquencies. This week, the talking point is a 14-year high in credit card delinquencies.^[ii] The Black Friday projections feed into this as well, with participants reporting they plan to use credit cards and buy now, pay later programs to stretch their budgets.

None of these fears are new, and they largely overstate the actual economic effects. We don’t dismiss the burden tariffs and higher living costs present, nor the hardship some households face. But the broad economy and stocks deal with aggregates, not individuals, and the aggregate figures remain fine. Disposable income, household debt, wage growth and the like are all within normal parameters. Tariffs are pinching businesses’ profits and consumers’ wallets, but they haven’t derailed spending or corporate earnings thus far. The latter is what stocks care about.

Markets look forward, about 3 – 30 months out and move most on surprise. Final holiday spending tallies will shed some light on whether all the doom and gloom was warranted. But stocks didn’t wait to deal with these fears. Markets have been digesting them for months, chewing them like cud. That defangs surprise power. Hence, by the time the numbers roll in, stocks will probably already be busy looking well into next year.

So don’t get hung up on Black Friday sales, whether they confirm weak expectations or show everyone was too dour. Stocks will have already lived through and priced it in real time, and it will be only one small variable they weigh.