While retailers shouldn't get their ho-ho-hopes up for anything other than a dismal holiday shopping season, investors in retail stocks may have more reason for cheer.

Despite the strength of the snapback in October retail sales, economists expect consumer activity to be muted, at best, in the months to come. Small wonder there: With the economy said to be in recession, most people aren't feeling particularly flush these days. The free-spending days are gone, and Americans are cleaning out their debt, increasing savings and hunkering down for the economic winter. Not exactly the retailing environment Rowland H. Macy dreamed about.

"Disappointing is the best characterization," says Salomon Smith Barney economist Christopher Wiegand of the holiday shopping season's prospects. "You have a lot of drags on discretionary spending."

Rising unemployment won't just cut into the spending of workers who are laid off; it will also rein in the many people who fear the next round of pink slips will head their way. Meanwhile, wage gains are diminishing and year-end bonuses will be meager at best. In all likelihood that holiday shopping article in your local paper isn't going to be talking about how retailers are seeing a green Christmas. Instead, it will say something like:

Malls Get Decked

But investors need not cringe at the prospect of such headlines. "Anyone who bought these stocks in the past few weeks knows that Christmas is risky," points out PNC Advisors retail analyst Elizabeth Shamir. "Nobody really expects a lot."

As a result, the bar is set low for the retailers. If they can manage to beat the Street's dreadful expectations, their stocks may perform quite well in the coming months. And yes, this does all seem incredibly theoretical, but there's some strong history to back it up.

Over the past decade, the worst December for retailers was in 1991, when nonauto sales rose just 0.6% from the previous year. Yet from the end of November 1991 to the end of February 1992, the S&P department store index rallied 15%. The next-worst December was last year, when nonauto sales grew just 3.7%. Yet the department store index surged 34% in the November-to-February period.

The best December was in 1999, when nonauto sales grew by 10%. In the November-to-February period the department store index fell 16%.

A skeptic could come up with all kinds of arguments why the pattern won't repeat itself this time around. Retail stocks, on a price-to-earnings basis, are hardly cheap. A recent spate of ugly data makes it look like the economic downturn will be deeper and longer than hoped, and that doesn't bode well for sales beyond the holiday season. And along with everything else cyclical, retailers already have put on a decent-size move over the past two months.

But denying history is rarely a good idea.