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Small-Caps and Holiday Sentiment: Why Thanksgiving Week Is a Bullish Period for U.S. Stocks

The U.S. stock market will be closed on Thursday for Thanksgiving, with trading resuming on Friday to wrap up what looks to be a strong November. The shortened trading hours don't seem to dampen traders' optimism, as bullish sentiment, particularly in small-cap stocks, remains strong. Many prominent institutions anticipate that expectations of robust consumer spending will further boost market sentiment, given the holiday season's support for the broader economy.

Morgan Stanley's analysis highlights notable historical patterns for the S&P 500 Index during Thanksgiving week. Since 1960, the SPX has delivered a median return approximately 2.5 times higher than its median return for all weeks combined. The day before Thanksgiving has been particularly strong, with the SPX closing higher 77% of the time.

Similarly, Schaeffer's Investment Research found that over the past 50 years, the S&P 500 has averaged a 0.54% gain during Thanksgiving week, posting positive returns 68% of the time. Historically, U.S. stocks, as measured by the S&P 500, have delivered "solid" returns during Thanksgiving week, with even stronger performance in presidential election years, according to BofA Global Research.

Holiday Season Spending Trends

Consumer spending in the U.S. during the Thanksgiving holiday season has seen significant growth in recent years, particularly in online shopping. According to the National Retail Federation, total spending during Thanksgiving Day, Black Friday, and Cyber Monday has surged by 191.2% over five years, climbing from $14.49 billion in 2017 to $27.7 billion in 2023. Online shopping continues to dominate as the primary driver of this growth.

Although the 2024 holiday season is the shortest since 2019, with only 27 days between Thanksgiving and Christmas, early promotions and steeper discounts are expected to drive strong spending. J.P. Morgan projects U.S. e-commerce penetration to reach 24.5% of adjusted retail sales this holiday season, up 119 basis points from 23.3% in 2023. They also forecast robust online sales growth of 7.5% year-over-year heading into Thanksgiving and the Cyber 5 weekend, underscoring the ongoing strength of the e-commerce sector.

Holiday Season Winners

J.P. Morgan expects $Amazon.com(AMZN)$   to maintain its leading 45% share of U.S. e-commerce, entering the holiday season with strong momentum from early promotions, including its Prime Big Deal Days event on October 8–9, which likely generated approximately $3.5 billion in incremental net sales.

Other key beneficiaries include e-commerce platforms like $eBay(EBAY)$   and $Shopify(SHOP)$  , as well as discount retailers such as  $Walmart (WMT.US)$, $Target (TGT.US)$, and $Dollar General (DG.US)$, which are well-positioned to capitalize on holiday spending trends.

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