Americans may not want to spend the night camping out in strip mall parking lots and getting into brawls just to snag the best sales, but they are ready to spend record amounts of cash.

According to the National Retail Federation, holiday spending is expected to grow 2.5% to 3.5% from 2023, rising to somewhere between $979.5 billion and $989 billion. That’s much higher than the $955.6 billion spent during the same time period last year.

“Consumers appear to be in tip-top shape heading into the year’s premiere shopping season around the holidays,” wrote Chief of Investment Strategy & Research at Glenmede Jason Pride.

Today will be a highly watched bellwether for spending over the rest of the holiday season. “With Black Friday just around the corner, retail traffic volumes from Thanksgiving through Cyber Monday are likely to give an advance indication of the ongoing resiliency of households in the US,” Pride added.

Your stocking stuffers just got cheaper

But retailers still face a number of hurdles this season, including persistently high prices, macroeconomic uncertainty, and time constraints—literally. There are actually five fewer days between Thanksgiving and Christmas, a fact that BofA believes will cut into retailers' festive profits.

Some retailers have also felt the sting of slower consumer spending in specific areas. Best Buy announced worse-than-expected earnings earlier this week, but the cherry on top was management’s forecast that discretionary spending on expensive gadgets and gizmos will remain weak through the holidays.

Analysts believe that bargain shopping will be the name of the game this season. “It seems that holiday shoppers will be more frugal this year as multiple years of high inflation and high interest rates have taken a considerable toll,” explained Bankrate analyst Ted Rossman.

In response, big-box retailers have unveiled huge markdowns to woo customers. That may help revenue in the short term, but in the long run, too many sales can do some serious damage to bottom lines.

Still, if that means we get a discount on that sweet toilet bowl nightlight we’ve been keeping our eyes on, we’ll take that deal.—LB

Thanksgiving is a time for gratitude, but investors should really be giving thanks next week. After all, according to Bank of America, next week is the perfect time to invest ahead of a year-end rally.

“The SPX has shown some "digestion" with lower returns the week after Thanksgiving, but strong positive returns from Thanksgiving through New Year's Eve suggests a buy the post-Thanksgiving dip ahead of a yearend rip pattern,” Bank of America technical research strategist Steven Suttmeier wrote in a recent note.

Since 1928, the S&P 500 (or SPX) has ended the week after Thanksgiving higher than where it began 53% of the time. And from Thanksgiving into year-end, the index is up 71% of the time.

This year, however, is special. During presidential election years, the week after Thanksgiving tends to be weak, with the S&P 500 dropping 67% of the time. But that’s actually good news, since the index rises 75% of the time between Thanksgiving and December 31 during election years.

“The SPX can be even weaker during the week after Thanksgiving in Presidential election years. However, strong positive returns from Thanksgiving through New Year's Eve in election years suggests a buy the post-Thanksgiving dip ahead of a yearend rip pattern,” Suttmeier wrote.

As we enter the most wonderful time of the year, our annual American tradition of buying useless stuff you’ll forget about by February cherishing moments with family and friends has already begun.

It’s certainly been a magical month for the retail sector. The S&P Retail ETF is up 9.41% over the past month, far outpacing the 3.42% the S&P 500 has gained over the same period.

Why? Inflation has finally plateaued, so consumers have snatched back some of their beloved spending power. And some investors are betting that President-elect Trump’s proposed economic policies will result in lower taxes for consumers and bigger and better earnings for retailers—both of which bode well for this group of stocks.

Santa’s sleigh will be full of these picks

Bank of America analysts unveiled their top picks for this year’s holiday retail stars in a recent research note. They chose these names based on how far each has to climb based on its current valuation and each company’s competitive position in the market.

“We remain positive on discount and off-price retailers as we think the solid value proposition attracts customers across income demographics during times of inflationary and macro pressures,” the analysts wrote.

Here are the analyst’s top picks and a tidbit about each stock:

• Bath & Body Works: “We expect continued progress on the sales inflection, driven by new category launches and product partnerships.”
• Ralph Lauren: “We expect strength in Asia and Europe to continue alongside improving North America trends."
• Walmart: “Share gains continue across product categories and income cohorts supported by its strong value offering and digital convenience."
• Starbucks: “Initiatives from new CEO Brian Niccol should provide a runway for growth into F25."
• Hasbro: “Our leisure top pick is HAS due to strong digital & Magic momentum and improved market share and assortment in toys, alongside cleaner inventory levels."

Even if you’re not wooed by any Black Friday markdowns on stuff like apparel and appliances, maybe consider investing for the long term instead.—LB

Thanks again for reading Brew Markets, we’ll see you in the final stretch to Christmas and the New Year!—MR, LB, and the Brew Markets team