U.S. consumers are ready to splash out $2,100 on holiday shopping this year, marking a 7% uptick from 2023, as per Bank of America’s latest survey.
This holiday season is set to be a lively one, with shoppers gearing up early and prepared to spend more, despite economic uncertainties still looming.
Online shopping is on the rise, with reward points emerging as a popular tool for managing holiday budgets. Gift cards are also cementing their position as a top choice for gifts across different age groups.
Shifting Shopping Patterns: Embracing Black Friday Early
The survey indicates that 54% of shoppers are eyeing Black Friday for snagging holiday deals, making it the go-to day for bargains. Furthermore, almost half of participants plan to kick off their shopping spree on Black Friday, Cyber Monday, or even earlier, emphasizing the significance of early-season discounts.
When it comes to expenditure, Americans are projecting an average holiday spend of $2,100, showing a 7% climb from the previous year. Notably, Baby Boomers are budgeting around $800, Gen Xers about $1,200, Millennials aiming for $4,000, and Gen Zers planning for $3,300.
Financial Stress and Shopping Preferences
The survey reveals that 62% of Americans are bracing for financial pressure from holiday expenditures, a slight improvement over last year’s 67%. Younger generations, especially Gen Z and Millennials, are most likely to feel the strain compared to Gen X and Baby Boomers.
Almost 60% of respondents intend to shop more at discount retailers this year, with a preference for wholesalers, e-commerce platforms, and dollar stores. Online shopping remains integral, with 48% planning to increase their virtual shopping experiences during this holiday period.
The Charm of Gift Cards During the Holidays
Gift cards retain their popularity during the festive season, with nearly 99% of recipients expressing appreciation for them. Over 60% of consumers received gift cards last holiday season, with a significant portion preferring them over physical gifts.
In terms of usage, 47% exhausted all their gift cards last year, with different age groups displaying preferences for when to buy gift cards, ranging from October to December.
Market Insights: Retail Stock Timing Strategies
An examination of the SPDR S&P Retail ETF (XRT), comprising retail giants like Amazon, Walmart, Target, and Best Buy, unveils a surprising trend: the holiday season spells weakness for retail stocks historically, with the first four months of the year posting the strongest gains on average.
December emerges as the second-weakest month for retail stocks, with February and January witnessing the most robust performances. This unexpected pattern can be attributed to investors waiting for post-holiday earnings before driving stock prices up early in the next year.
So, for traders eyeing retail stocks, the optimal time for buying could be post-holiday season, when positive earnings reports start rolling in, propelling stock prices upward.
