How Goldman Sachs says you should play retail stocks ahead of Black Friday.
One of the biggest shopping days of the year is coming up. And that means that retail companies will be seeing a lot of action. Consumers will be getting ready for Christmas. Meanwhile, Wall Street traders playing the action.
According to Goldman Sachs, a third or more of annual retail sales come in the final quarter of the year. This is driven by holiday demand. Furthermore, the impact is even larger for the stocks of individual retail companies. They have seen pronounced drops this year as consumers do more shopping online and less in brick-and-mortar stores. As a result there has been a massive number of locations closing.
“Over the past three years, November and December have been 3-4X more important for retail stock performance than other months of the year.” This according to Katherine Fogertey, a Goldman options strategist. “While secular pressures from the growth of e-commerce have largely broken the sector’s ties to many macro variables this year, we still see potential for stocks to take cues from holiday shopping given the outsize impact to sales.”
Volatility around holiday shopping is common, even expected every year. Even so, Goldman argued that investors weren’t fully appreciating how big the swings could be this year.
“Option investors are positioning for this potential in some instances. However, we believe they are missing the full potential for volatility.”
Most noteworthy, #millennial investors tend to favor retail stocks before #Black Friday.