Last Updated on 11 November, 2023 by SamuelssonThanksgiving Day is one of the federal holidays in the US. The day after Thanksgiving is called Black Friday and is a day when consumers go on a shopping spree. But how does Thanksgiving affect the US stock markets? Stock market performance during Thanksgiving is higher than any random week. The US financial markets do not open on Thanksgiving Day because it is a federal holiday. Trading does not take place on any of the U.S. stock exchanges on that day, and the following day, the stocks and bond market also close early.
The Thanksgiving holidayThanksgiving Day is an annual federal holiday in the United States to celebrate the harvest and other blessings of the past year. It is celebrated on the fourth Thursday of November every year. It is generally believed that the American Thanksgiving is modeled on a 1621 harvest feast observed by the English Pilgrims of Plymouth and the Wampanoag people. The Thanksgiving holiday is particularly rich in legend and symbolism. Traditionally, the Thanksgiving meal typically includes turkey, bread stuffing, potatoes, cranberries, and pumpkin pie. Regarding vehicular travel, the Thanksgiving holiday is one the busiest of the year, as family members tend to gather together to share the moment.
Is the day before Thanksgiving or after a trading day?While Thanksgiving Day is not a trading day for all US markets, the day before and after it can be trading days. The day before is a full trading day, while the Friday after Thanksgiving (Black Friday) is a half-day where the stock market close at 1300 local ET time. The Friday is called Black Friday because of its importance for the retail sector.
The Thanksgiving holiday effect in the S&P 500 – backtest 1: the Thanksgiving weekHow does the stock market perform around the famous turkey celebrations in November? We test the Thanksgiving holiday effect this way:
- We go long at the close the Friday prior to Thanksgiving
- We exit at the close on Black Friday (we hold for one week)
There are 54 trades since 1970, the average gain is 0.46%, the win ratio is 66%, the profit factor is 1.7, and the max drawdown is 9%. This equals a CAGR of 0.44% while being invested just 1.6% of the time. The gain is higher than for any random week during the year.
The Thanksgiving holiday effect in the S&P 500 – backtest 2: the week after ThanksgivingIn our second backtest of the day, we look at the performance the week after Thanksgiving. We test the following:
- We go long at the close of Black Friday
- We sell at the close one week later
Thanksgiving effect until December – backtest 3Let’s test another twist of the Thanksgiving effect:
- We go long at the close the Monday prior to Thanksgiving.
- We exit at the close on the first trading day of December.
The Thanksgiving week per weekday – backtest 4Let’s look at the performance per weekday during the Thanksgiving week:
- Friday close until Monday close: 0.14%
- Monday close to Tuesday’s close: 0.02%
- Tuesday to Wednesday: 0.23%
- Wednesday to Black Friday: 0.1%
Thanksgiving effect on retail stocks – Black Friday – backtest 5The day after Thanksgiving is called Black Friday because of the extensive sales on that particular day. This day has specifically become popular after the year 2000, not only in the US, but also in other areas of the world. Because of Black Friday, which has developed into a consumer bonanza, it might be interesting to check the performance of the retail sector. Let’s see how retail stocks have fared during the Thanksgiving holiday season. To get a longer backtest we used Fidelity’s retail mutual fund as a proxy (FSRPX). We go long at the close on the Friday prior to the Thanksgiving week and we exit at the close on Black Friday. This is the equity curve since the late 1980s: The performance is strong: the average gain is 0.71% per trade, much stronger than for the S&P 500. From the year 2000, it has been 0.9% per trade. Keep in mind, though, that November and December are strong months in the stock market.
Order Amibroker code for the Thanksgiving effect:Testing seasonalities can sometimes be difficult. If you want to have the Amibroker code for the Thanksgiving effect, you can order it here:
Holiday effects in the stock marketWe have covered all the US stock market holiday effects in trading. To sum up, we have the following other holiday effects in the US markets:
- The Martin Luther King Jr. Day holiday effect in trading (Backtest and strategy)
- George Washington Day/President’s Day holiday effect in trading (Backtest and strategy)
- The Easter Holiday effect in trading (Holy Thursday – best day of the year for stocks? Backtests and strategies)
- The Memorial Day Holiday Effect In Trading (Backtest And Strategy)
- The 4th of July Holiday Effect In Trading (Independence Day Effect – Backtest and strategy)
- The Labor Day Holiday Effect In Trading (Backtest And Strategy)
- The End Of The Year Rally In Stocks (Santa Claus Rally/Effect Strategy backtests and strategies)