Fisher Investments Editorial Staff
Monetary Policy, US Economy

Black Friday Not So Bleak

By, 11/30/2010
 

Story Highlights:

  • The IMF and eurozone members agreed on an €85 billion bailout for Ireland.
  • Investor fears weighed on European stocks, and Spanish and Portuguese yields continued to rise.
  • But US markets closed down only a little after starting out firmly in the red.
  • Thanksgiving weekend and Black Friday sales both saw an uptick from last year's numbers—the latest addition to recent encouraging US economic news.

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Much money was spent in both Europe and the US this past weekend—but the sources and beneficiaries of those funds couldn't have been more different. In Europe, an Irish bailout took shape—€85 billion in funds from the Irish government, the IMF, the EU, and select non-eurozone European countries—but failed to significantly calm European markets. Spanish and Portuguese bond yields continued rising (in contrast, yields fell significantly after the original bailout), European stocks dropped, and the euro weakened.  

Investors may remain focused on Europe's periphery, but a disorderly euro collapse (a valid but unlikely threat to the bull) remains firmly off the table for now. And however the euro bailout shakes out in the near term, PIIGS yields will likely remain higher longer term. The German debt restructuring proposal (post 2013) could make last decade's low, tightly clustered rates a thing of the past. Markets have already begun (and will continue) pricing different risk levels for different eurozone countries.  

As European stocks fell sharply, US markets fought upward from an opening deep in the red to close down only a little. What made US investors think twice Monday? Consumers, both online and in person, took advantage of Thanksgiving weekend and Black Friday deals, snapping up everything from toys, to shoes, to jewelry, and electronics. According to one survey, the average shopper spent an average $365 over the weekend compared to $343 last year. Multiplied by an estimated 212 million shoppers hitting stores (about 8% more than last year and the most since the survey's 2004 inception), the numbers don't look too shabby. True, the value of in-store sales was up only 0.3% from last year, but that's just part of the story. Fighting lines at brick-and-mortar stores is fast becoming a thing of the past as consumers increasingly turn to their computers. According to preliminary reports, online sales on Black Friday were up anywhere from 9% to 15.9% over last year.    

The myriad twists and turns of the euro bailout understandably keep grabbing headlines—a collapse of the common currency would be very troublesome. But most of the "new" developments lack surprise power. If Ireland, Portugal, and Spain weren't considered default risks last May, the size of the emergency aid package would have been far smaller. US markets appeared to shrug off the worst of the European gloom on positive economic news, and we expect positive fundamentals will continue to outmatch euro fears.

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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