Two events will shape the markets this week: light trading because Thursday is Thanksgiving and the shopping madness that typically follows on Black Friday.
In light of how the economic downturn has pummeled consumer spending, though, investment advisers are issuing a word of advice: Focus on the turkey, and turn off the TV.
"I'm in touch with every one of my clients this week, telling them not to even turn on their computers next week," Vincent Barbera, director of financial planning at TGS Financial Advisors, says. "Don't turn on your televisions. Just relax and wait for a potential December rally. Buy some Christmas presents at big discounts."
It wouldn't be surprising if some investors do opt to stick their heads in the sand next week. The market has been bombarded with dour news about consumer sentiment and weak data for retail and auto sales to back up shoppers' emotional claims. More data will be released on consumer sentiment next week, as well as personal income and spending, but a Conference Board survey released on Friday was a bleak curtain raiser for the holiday season. U.S. households expect to spend an average of $418 on Christmas gifts this year, 11% less than the holiday shopping season of 2007, according to the group.
The pullback has been something of a windfall for cost-cutting wholesalers, as consumers flock to thriftier outlets, like
to stock up on essentials at discounted prices. But other merchants have reason to be concerned, whether a department store like
, a mall-centric store like
, or a high-end retailer like
Barbera expects some companies to issue statements characterizing traffic and sales on Black Friday, even if no specific data are released. That could work to boost confidence for some merchants, while preparing investors for weak results at others.
Outside of the retail sphere, the National Association of Realtors will release existing home sales data for October on Monday, and the Census Bureau will disclose new-home sales on Wednesday. The Commerce Department will also release preliminary figures for third-quarter gross domestic product on Tuesday, indicating how far economic output has dropped so far. And on Capitol Hill, lawmakers are still crafting a bill to assist U.S. automakers
, while President-elect Barack Obama (D., Ill.) lays the ground work for the regime change in January. Reports emerged Friday that
, president of the New York Fed, was the pick for Treasury secretary and Hillary Rodham Clinton was poised to accept the secretary of state post.
In the meantime, as the Treasury continues to dole out financial-bailout funds, bank stocks like
are under siege, with several firms facing rumors about impending collapse or acquisition.
Few major regulatory and legislative decisions are likely to be solidified during a lame-duck session on a week when most of Washington, D.C., has gone home for a turkey dinner. Regarding the economic data, investors should be looking forward instead of back, says Gregg Fisher, president and chief investment officer at the investment-advisory firm Gerstein Fisher. While the steady drumbeat of bad economic news has depressed market sentiment and stocks, Fisher believes that long-term investors should see it as a buying opportunity for strong firms at rock-bottom prices.
"The economic data that's going to be coming out virtually every day, in some capacity -- retail sales, auto sales, unemployment, producer prices, the use of gift cards for retailers -- virtually every piece of data that people are reading and hearing about is negative," says Fisher. "And I think it's going to be a while before any piece of data comes out that is positive about the economy."
Fisher says investors should more carefully scrutinize indicators like the yield curve, which shows the relationship among interest rates on bonds with different maturity dates. Though the market is still flocking to safe-haven investments like Treasury bonds, yield curves have narrowed significantly since skyrocketing last week. That means investors have become much more bullish on the country's future economic health, while taking shelter for the near term.
Vincent Catalano, chief investment strategist at Blue Marble Research, says on his blog that the weak economy and chaotic government response has done little to soften investors' nerves so far.
"A near state of exhaustion exists," notes Catalano, "be it the investor trying to make sense of the current climate or the avenues being pursued by government in dealing with the credit and economic crisis or the negative feedback loop that is producing lower lows."
Perhaps family time, comfort food and a necessary break will revive the strength of those preparing for the next cache of negativity, or those trying to predict the market's next move.