What’s Black Friday all about and who is it good for?

Black Friday has three origin stories. The first is about Friday the 13^th, a day superstitious types fear. The second, of course, is the Friday after Thanksgiving in the US. Thanksgiving always falls on the fourth-Thursday in November. The next day, the Friday, kicks off the US holiday shopping season.

The third Black Friday came in 1869. Investors won’t want this to be replicated today as it was linked to the crash of the gold price, which led to a Wall Street crash!

History.com reveals the following on the subject: “Two notoriously ruthless Wall Street financiers, Jay Gould and Jim Fisk, worked together to buy up as much of the nation’s gold as they could, hoping to drive the price sky-high and sell it for astonishing profits. On that Friday in September, the conspiracy finally unravelled, sending the stock market into free fall and bankrupting everyone from Wall Street barons to farmers.

Now let’s go back to today’s Black Friday.

The reason the Yanks first called it this in the 1960s was

 when the city of Philadelphia found the traffic chaos on this first shopping day after Thanksgiving a “black day” for car drivers and the huge crowds going to the shops. It wasn’t until the 1980s that retailers and marketeers explained that many retailers move out of the red (or losses) into profit (or the black) on this day after Thanksgiving, when US consumers start their “shop until they drop” routine ahead of Christmas, Hanukkah and other festive days.

Black Friday now straddles a virtual long weekend that ends with Cyber Monday, when in 2005 the US-based National Retailers Federation revealed that employees used their bosses computers to buy stuff online! Cyber Monday was revealed as one of the biggest days for retail, though it’s likely there was ‘some exaggeration’ ahead of a trend that big stores were trying to promote called online shopping.

Nowadays, shoppers don’t need to use their bosses’ computers to do their shopping. While they now use their smartphones, their employers’ time is probably ‘exploited’ in the age of working from home!

The Daily Telegraph has looked at the Australian experience of Black Friday and here are the main observations:

1. Last year we spent $6.8 billion over the four-day shopping spree.
2. Black Friday is now bigger than the Boxing Day sales period.
3. Some retailers started Black Friday specials in October to beat the rush.
4. Shoppers tend to hold back their spending until Black Friday when there’s more competition on discounting.
5. Retailers are sweating on a big surge of buying after a tough year due to the cost-of-living crisis.
6. Smaller retailers tend to be at a disadvantage compared to bigger rivals when it comes to the size of discounts and the marketing of these good deals.
7. This week’s 3.8% inflation reading and its implication of no rate cuts (or even a rise) in 2026 could reduce the enthusiasm for shopping for consumers with big mortgages.

“Retailers are saying they’re expecting great results, but the … increase in headline inflation this week may reduce consumer confidence,” Queensland University of Technology marketing and consumer behaviour professor Gary Mortimer told the Tele’s Giuseppe Taurello and Sarah Perillo.

Meanwhile, a Xero survey of small business owners found only 39% will do Black Friday sales and a third said rising costs are making discounts undoable.

The Reserve Bank, Treasurer Chalmers and economists will be carefully watching the shopping numbers over the next four days to determine the health of the economy. The high inflation numbers suggest the economy might be stronger than we think, which could increase the calls for an interest rate rise.

If that happens, we might see a very subdued Christmas and Boxing Day sales period that wouldn’t bode well for those small businesses that boycotted the Black Friday sales and then have to face a more despondent consumer before the festive season.

Only a global financial shock that threatens a recession will force our Reserve Bank to consider interest rate cuts next year. Why is this so?

Forget a rate cut in 2026! Only a global financial shock that threatens a recession will force our Reserve Bank to consider interest rate cuts next year.

While that kind of disaster can’t be ruled out, in the age of big debts for governments globally, potential overinvestment in Artificial Intelligence (and of course the human curve ball called Donald Trump), this could happen, though it’s not something anyone should wish for!

The reasons why economists and yours truly can’t see a chance of a cut is the persistently high inflation rate, which came in at 3.8% for the 12 months to the end of October.

While this number looks really big, it’s a less trustworthy number because it has volatile, shorter-term price changes in it. The RBA looks at the underlying core (or trimmed mean) inflation reading. This came in at 3.3%.

Remember, as the RBA wants this latter inflation number between 2-3%, 3.3% is too high for a rate cut to be considered. If it remains here or higher, they could raise rates.

As economists expected the headline rate to be 3.6% and the underlying rate 3%, the real world result was really on the high side. This is why everyone, including Paul Keating’s famous “galah in the local pet shop” is telling you to “forget a rate cut in 2026”.

Apart from a major, worldwide financial crisis, there could be a surprise if these inflation numbers prove to be unreliable. Why would I suggest that?

Well, these are monthly Consumer Price Index calculations based on a more extensive coverage of goods and services. It looks at 87% of the goods and services that the always regarded better quarterly CPIs have surveyed.

So, while this October should be more believable, when new statistics are created, there can be unusual results. However, I think this looks like an outside chance of being the case.

So, where has this inflation come from? Diana Mousina from AMP gave us a neat summary below.

Source: ABS, AMP

 

What we pay for services was a big issue with this big, bad inflation figure. “In terms of contribution to inflation, which is a factor of the weight of the item and the price change, there are more contributors to inflation from services categories, like rents, medical costs, holiday travel, eating out and education,” Mousina points out.

Going deeper into our inflation challenge, she says:

1. Price growth has been the highest in housing (+5.9% year on year) due to electricity (as the rebates rolled off) and rents.
2. Clothing and footwear prices are up by 5.4% over the year, from higher jewellery prices due to gold and silver prices.
3. Education prices are up by 5.4% over the year from high school fee increases.
4. Alcohol and tobacco prices are up by 4.4% over the year due to the high tobacco excise and higher beer costs.
5. Health prices are up 4% due to a lift in medical and hospital service prices and a rise in private health insurance premiums.
6. Recreation and culture prices (+3.2% year-on-year) were driven by a rise in domestic holiday travel and accommodation.
7. Food prices are up by 3.2%, with meals and take away prices up by 3.6%. Also, there are some single item increases in areas like beef, lamb and goat, cocoa and coffee.
8. Transport prices (+2.7% year-on-year) are up to due to vehicle maintenance, repairs and other services for cars.
9. Fuel prices are up only modestly (at 1.9% over the year).
10. Insurance inflation has moderated (+2.5% year-on-year) and communication price inflation remains low at 0.8% over the year.

While these are the contributors to inflation in a specific sense, what the overall general causes of this inflation? For those who want to blame the Albanese Government, try these policies and politicians, where they:

1. Gave tax cuts: blame Treasurer Chalmers and the PM.
2. Supported higher wages: blame Tony Burke and the PM.
3. Boosted social welfare, especially the NDIS, which has blown out spending-wise: blame Bill Shorten, now retired.
4. Ended electricity rebates, which were kept inflation lower but boosted demand: blame Jim and Albo.
5. Helped kept unemployment lower but this also boosted demand and that added to inflation: the PM has to cop the blame for this.

While these policies have kept demand and inflation high, they have kept unemployment low because the economy has avoided anything that looks like a recession, which the Kiwis endured, and are still suffering from the consequences. Their headline rate of inflation is 3%, which is lower than ours. But their unemployment rate is 5.3% — the worst rate since 2016. Our jobless rate is only 4.3% and the bottom line is that our Government has kept people in work and the economy out of recession. However, the price has been higher inflation and only three interest rate cuts, when economists were expecting five or six.

Therefore, people with mortgages and small businesses with debts are wearing the pain for the others who have jobs, who are holidaying overseas and going out to dinner, as well as drinking coffee in cafes like there’s no tomorrow.

While I often say this, it is true: economics is a zero sum game, where winners are bankrolled by losers. It’s why we call economics a dismal science!

While I’m a fan of industry super funds, especially for low balance and lower income workers, they’re not perfect. These actions by ASIC and APRA are a positive trend.

The Treasurer and Finance Minister are armed and getting serious about getting the country’s budget to a better place. Will they succeed?

The ‘one big beautiful’ aspect of Labor’s huge victory at the May poll and the Coalition’s current leadership turmoil is that the money mean members of the Government — Treasurer Jim Chalmers and Finance Minister Katy Gallagher — are getting serious about getting the country’s budget to a better place.

This comes as the AFR recently revealed that a hiring boom and big pay hikes for around 185,000 public servants is set to blow out the budget by $7.4 billion. Even more worrying is that “spending on federal public sector wages was $40.9 billion last financial year, an increase of 9.5 per cent, on top of a 10 per cent rise in 2023-24.”

Political cynics might argue that this was a lot of public sector vote buying!

Gallagher has told top public servants to find savings, that is, cuts to spending up to 5% to kill the big growth in public sector costs. To be fair, while our budget position is better than many comparable first world economies, there is a growing concern from the alarmist economic and investing experts, as well as influential commentators, that if a stock, bond or private credit market problem got out of hand, government bailouts would be harder to implement.

This is a consequence of the big government spending to rescue the world from a possible Covid-created Great Depression. This led to a sustained bout of high inflation and a surge in interest rates, which was then followed by a stock market rally powered by rate cuts, an AI boom (which many say is a bubble) and some of the unusual policies of President Donald Trump.

So, Gallagher’s demand for belt-tightening from public servants is sensible, especially as the Government has curried favour with its voters/constituency by being generous with tax cuts, wage rises and spending on social welfare and renewable energy projects.

Many of these above actions have kept unemployment levels low, which has been good for the budget’s bottom line, as long dole queues lead to government relief payments to the jobless and reduces tax collections.

However, it has kept inflation too high and curtailed expected rate cuts. So, cuts to the public service will not only reduce the budget’s deficit but also put downward pressure on inflation and rates.

Keeping the economy growing with lower inflation means the private sector should grow, which will offset any lower economic growth because the Government is spending less.

Here are the main points of the Gallagher plan to improve the budget:

1. Cabinet Ministers and top public servants have been asked to reveal how they could meet these cost cut targets.
2. These are on top of a mandatory ‘efficiency dividend of 1%’ that these people are supposed to find each year.
3. These potential savings will be on show in the May Budget next year.
4. Non-permanent contractors are currently being shown the door.
5. Departments are already reducing numbers via natural attrition and freezing of non-essential roles.
6. Voluntary redundancies are expected.

The AFR’s John Kehoe and Ronald Mizen gave examples of how Gallagher’s commands are already being followed: “Treasury plans to cut 250 jobs over two years, a 15 per cent head count reduction from its average staffing level of 1600 in 2024-25. The CSIRO announced last week it would shed up to 350 positions, in addition to more than 800 roles it has cut over the past two years.”

While these cutbacks are sensible, they should have been done in 2024. However, there was an election to be won. The problem of delaying these cuts, which won’t really happen until 2026, is that history says Wall Street’s worst time with a new US President is in the second year. And that’s next year!

Add this to current AI concerns and inflation (that’s not making interest rate cuts easy to deliver by central banks) and this could create a potential financial crisis that often needs government spending and rescuing to avoid big unemployment numbers and business failures.

The only one thing I hold on to that might make 2026 okay for investment markets is the fact that the US has an unusual President, who, via his financial deregulation promises and his One Big Beautiful Tax bill, might delay the day of reckoning that could get the Albanese Government’s financial house in order.

Before I go, remember this AFR-delivered fact: “The total public service workforce has grown about 38,200 since 2021 to 193,500, according to the Australian Public Service Commission.”

The battle for climate change has become Trump-v-the world, with G20 leaders locking arms, with promises to spend trillions on their commitments to net zero greenhouse gas emissions by 2050.

When it comes to climate change, the battle has become Donald Trump versus the world, with G20 leaders locking arms and their taxpayers’ hip pockets with promises to spend trillions on their commitments to net zero greenhouse gas emissions by 2050.

Showing his support for the goal, Prime Minister Anthony Albanese said his government’s coal and gas policies are not up for change. This puts him at odds with his new buddy in the White House, who actually boycotted the G20 summit in Johannesburg that saw the leaders of the top 20 most wealthy economies also sign up for free trade and multilateral frameworks, which are other non-Trump-endorsed policies.

In case you missed it, the US President refused to attend the conference because of claims that the South African government was persecuting white farmers. This is disputed by South African leaders.

Here are the main points that were agreed to at the G20 get together:
1. 600 million Africans without electricity need help from wealthier nations to help lower their emissions.
2. To achieve that, US$5.8-5.9 trillion would need to be spent by G20 nations.
3. Low cost financing will be sourced to make the above happen ASAP.
4. China, Russia and India vowed to “intensify our efforts” to reach “carbon neutrality by or around mid-century”, though The Australian reports that while the leaders of China, Russia and Argentina didn’t attend, they had representatives attending.
5. A goal was set to triple the world’s renewable energy generation by 2030.
The Prime Minister has told reporters that his support for what other leaders agreed to was not a protest vote against President Trump. He saw it as purely a decision to be on the same page as the 19 other countries who signed the G20 agreement. However, it could also be based on his understanding of what we want as a sovereign state, given his big election win, which he would argue was an endorsement of our view on wanting to tackle climate change.

In other moves in Johannesburg, the PM had “meetings with the EU and India to progress free-trade deals, while striking a trilateral technology and innovation partnership with India and Canada,” The Australian’s David Ross reported.

He suggested there was an anti-Trump tone to the rhetoric at the conference. Significantly, he also reminded us that the next G20 meeting in 2026 will be held in Trump territory — the Trump Doral Golf course at Miami, Florida!

Are we out of the woods when it comes to worrying about a big stock sell-off? Are we on the path to a brighter environment for stock prices?

The big story for our stocks portfolio and inevitably our super was the latest company earnings from Nvidia, the world’s leading tech company spearheading the investment in Artificial Intelligence, headed up by a black leather wearing bikers jacket with the cool name of Jensen Huang. Before yesterday, the Wall Street feeling was that if this company reported better than expected then stocks should rise.

Our stock market had fallen around 7%, we waited with bated breath. When key shares influencers saw a 62% increase in revenue to $57 billion for the last quarter and a forecast of $63 billion for the next, it should’ve eased fears about an AI bubble with little chance of decent returns after huge investments by Nvidia, Apple, Amazon, Alphabet, Meta, Microsoft, Tesla and other big tech companies such as Oracle.

Players especially liked Jensen telling the awaiting market that the sales of its Blackwell chips were “off the charts”. And yep, people on the Australian market bought it and our S&P/ASX 200 index spiked 104.80 points (or a big 1.24%). But the chart below shows how negative the stock market has been for the past month, which is still down just shy of 6%!

S&P/ASX 200

Interestingly, while the Dow Jones index on Wall Street was only down 1.3%, the Nasdaq was off 2.76%, which indicates our market looks like we’ve had an overreaction to this tech sell-off in the US.

It also means our market is dropping not just for the US tech sell-off, which is linked to possibly crazy AI bubble investing that also has hit our best tech companies. Other factors are at play, so let me list them below:

1. The RBA doesn’t think we need another interest rate cut until mid-2026 if we’re lucky.
2. Over the past month the CBA share price has dropped 11.85%. This is our biggest and most important stock in the S&P/ASX 200.
3. JB Hi-Fi is down 16.63%, Macquarie is off 14.77%, NAB is 6.26% and the other banks are lower too.
4. Our miners have had to contend with a slower growing China which is playing hardball on things like the price of iron ore with BHP and so BHP’s share price is off 5.46% over the month.
5. And there have been concerns that the Fed won’t give the US the December interest rate cut at a time when the shutdown stopped giving us economic data on the world’s biggest economy. There’s also a chance that the Supreme Court will call President Trump’s tariffs illegal, which would be a temporary problem for Wall Street.

Interestingly, the Yanks got the September jobs number overnight and 119,000 jobs were created, which was more than expected and doesn’t help the case for those arguing the US economy needs a rate cut ASAP.

While this good/bad news has meant the Nvidia result has been cancelled out by key US stock players overnight, the strange people on the New York Stock Exchange are ignoring the news that the US economy is stronger than expected and the AI investment looks like it’s generating good revenue and profits.

This also makes the case that shares in these big tech companies are in a bubble, which makes me think that while we might not be out of the woods when it comes to worrying about a big stock sell-off, we look like we’re on the path to a brighter environment for stock prices.

Here's one last point you should be aware of. The second year of a US presidency is usually the worst for stocks and has a history of a 17% drawdown! While this is based on the average performance of stocks in year two of a new president, these numbers would be based on a ‘normal’ US president. However, you might’ve noticed that the current guy in the White House is abnormal and is promising his ‘One Big Beautiful Bill’ with tax cuts. And then there’s financial deregulation that could easily make year two for Donald Trump’s presidency an unusual one where stocks actually rise rather than fall.

It could mean I will worry about 2027 being the significant sell-off year. All I can suggest you do is — watch this space! For now, I won’t be surprised if there’s a Santa Claus rally running into the festive season because the world knows that the Yanks are famous for putting on a great Christmas!