The upcoming Black Friday marks the start of a holiday shopping season that will offer critical insights into U.S. consumer resilience amid lingering inflation pressures. Retail performance during this period could highlight how buyers are navigating higher prices, even as inflation moderates.
The S&P 500 gained 1.7% last week, nearing all-time highs, bolstered by strong third-quarter earnings, which rose 9% year-over-year. Yet, recent retail earnings revealed contrasting outlooks: Walmart raised its profit forecast, while Target projected weak holiday-quarter results due to budget-conscious shoppers shifting to competitors.
Consumer spending, which constitutes over two-thirds of the U.S. economy, remains a focal point. Despite a more optimistic holiday sentiment compared to the last two years, Morgan Stanley’s survey showed that consumers remain selective in their purchases, reflecting ongoing financial pressures.
Retail stocks are similarly divided. Market leaders like Walmart and Costco have seen significant gains of 70% and 46%, respectively, in 2024, while discounters like Dollar General and Dollar Tree have faced steep declines due to inflation’s impact on lower-income customers.
The season also brings a test for retailers’ strategies in balancing competitive pricing with profit margins. Analysts emphasize the importance of adapting to consumer needs while managing costs effectively.
Investors will closely watch retail earnings from Best Buy, Macy’s, and others this week, alongside the Personal Consumption Expenditures Price Index, which will provide fresh insights into inflation trends.
This shopping season will shape not just consumer sentiment but also the broader economic outlook heading into 2024.