US Shoppers Plan To Spend $2,100 This Holiday Season, 7% Higher Than 2023: When Should Traders Start Buying Retail Stocks?

U.S. consumers plan to shell out $2,100 on holiday shopping this year, a 7% increase over 2023, according to a new survey from Bank of America.

The 2024 holiday season promises to be dynamic, with more consumers shopping earlier and spending more, despite lingering economic concerns.

Online shopping continues to grow, and reward points are increasingly becoming a go-to tool for managing holiday expenses. Gift cards, meanwhile, are solidifying their place as a favored gift option across generations.

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Early Holiday Shopping Trends: A Shift Toward Black Friday

According to the survey, 54% of consumers expect to shop on Black Friday, making it the most popular day for holiday deals.

Moreover, 49% of respondents intend to begin their holiday shopping on Black Friday, Cyber Monday, or even earlier, showing that the demand for early-season discounts continues to dominate.

In terms of spending, Americans are expected to shell out an average of $2,100 during the holiday season, marking a 7% increase compared to 2023. Generational differences are evident, with Baby Boomers budgeting about $800, while Gen X will spend around $1,200.

On the higher end, Millennials plan to spend $4,000, and Gen Z forecasts around $3,300.

Economic Strain And Shopping Preferences

The survey reveals that 62% of Americans anticipate financial strain due to holiday expenses—though this is a slight improvement from last year’s 67%.

Younger generations, particularly Gen Z and Millennials, are the most likely to feel this pressure, with 68% in each group expecting financial strain. In contrast, 63% of Gen X and 54% of Baby Boomers share the same concern.

Nearly 60% of respondents plan to shop more at discount retailers compared to last year, with a preference for wholesalers/big-box stores (54%), e-commerce sites (41%) and dollar stores (39%).

Online shopping remains a crucial part of the holiday retail landscape. 48% of survey respondents said they will increase their online shopping this year, while 13% plan to shop online less.

This surge aligns with the latest Bank of America’s credit and debit card data, which shows that online spending at retailers increases by about 35% during November and December compared to non-holiday months.

Millennials lead the charge in online shopping, with 43% of their retail transactions made online, while Gen Z trails with 33%.

Gift Cards: The Preferred Holiday Choice

Gift cards continue to be a popular choice for both givers and receivers during the holidays. The Bank of America survey found that nearly 99% of people who receive gift cards appreciate them.

More than six out of 10 consumers received gift cards during last year's holiday season, with 35% of respondents saying they prefer gift cards over physical gifts. Additionally, 61% of consumers are equally satisfied with both gift cards and traditional presents.

Regarding gift card usage, 47% of consumers used all of their holiday gift cards last year, while 19% used most of them and 9% used only half.

According to the survey, 75% of consumers plan to start buying gift cards no earlier than October, with 13% making purchases in October, 35% in November, and 27% waiting until December.

Gen Z leads the pack in receiving gift cards with 79% having received them during the holidays, followed by 75% of Millennials, 69% of Gen X, and 52% of Baby Boomers.

Market Implications: The Best Time To Buy Retail Stocks Is After The Holiday Season

A seasonality analysis of the SPDR S&P Retail ETF XRT, a popular retail-focused exchange traded fund which includes heavyweights like Amazon.com Inc. AMZN, Walmart Inc. WMT, Target Corp. TGT, and Best Buy Co. Inc. BBY, uncovers a surprising trend: despite the holiday season being a retail bonanza for consumers, it’s actually a historically weak period for retail stocks.

Over the last 17 years, the holiday months have shown on average negative performances for the retail sector, while the strongest gains are concentrated in the first four months of the year.

For retail stocks, December represents the second-worst month of the year after June, with an average drop of 1.46%. In contrast, February and January are the best months, with average gains of 2.16% and 1.1%, as per TradingView data.

The rationale behind this counterintuitive trend may lie in the timing of earnings reports. Investors tend to wait for post-holiday earnings results, which often reflect the success of the season.

As those results come in after the holidays, there's a rush of buying on positive news, causing stock prices to rally early in the following year, rather than during the holiday period itself.

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