Bullish Market Could Signal a Bustling Gift-Buying Black Friday

'Tis the season for giving and signs point toward an increase in gift shopping between Thanksgiving and Christmas. Inflation has begun to cool down and the U.S. stock market has been heating up, continuing to post record highs. All good signs for consumer spending. But before shoppers open their wallets and load up their sleds, there are some factors - like post-election jitters, already tight budgets and fewer shopping days - that still don't have everyone feeling the ho-ho-ho of the holidays.

"I definitely think that the stock market's performance can impact holiday spending," said Stephen Ciccone, an associate professor of finance at the University of New Hampshire. "The U.S. stock market has continued to maintain record highs - with a few mixed closings in recent days - but at this high level, people feel richer, more optimistic and are likely to spend more this holiday season."

Ciccone cites a common phenomenon known as the holiday effect where there can be a slight uptick in stock prices around a holiday. There is no one clear reason why but experts point to trading volumes, investors on vacation or others using the slower time to sell off riskier stocks. Whatever the factor, consumer spending habits around Black Friday, and throughout the holiday season, can often offer insight into the year ahead.

While the markets can be an indicator for holiday spending, Ciccone cautions that they are ever-changing and can be hard to predict. He stresses that there are many different factors that determine consumer spending and there is a lot of uncertainty in the world right now with some people still having trouble making ends meet and looming concerns like the new presidency, potential pending government shutdown and continued high interest rates.

"High consumer spending on Black Friday can be an indication of a profitable shopping season and consumer confidence in the economy," said Ciccone. "But, if spending is down and retailers do not meet expectations on Black Friday, it could be because consumers have concerns and are reining in their spending, which could impact the stock market and the economy heading into the new year."

According to the National Retail Federation, U.S. holiday sales are expected to rise 3% to 4% for November through December, compared with a 5.4% growth of a year ago. The group estimates that sales will increase to between $957.3 billion and $966.6 billion, during that time period.

For those concerned about the economy in 2025, Ciccone says he wishes he had a crystal ball, but offers this - trends also show that stock market performance tends to rise pre-election, which happened this year, and can continue post-election, especially after close contests, whether the candidate is republican or democrat. Some experts believe this is because the U.S. has strong financial institutions, so who the president is often does not matter that much for the general economy.