The holiday season is kicking off this week with Thanksgiving Day and Black Friday in the spotlight. And retailers have a tradition of tapping this fervor the most as about 25-40% of sales comes during the holiday season.

This holiday season will also be no different with an expected surge in retail stocks. Retailers are splurging on promotions, early-store openings, heavy discounts, as well as free shipping on online purchases to lure customers. Additionally, encouraging economic and industry fundamentals, strong earnings as well as a bullish stock market are laying a strong foundation for the holiday season.

Encouraging Fundamentals

Growth in the U.S. economy has been steady. GDP expanded 3% year over year in the third quarter, following 3.1% growth in the second quarter. This represents the best back-to-back quarters of at least 3% growth since 2014. Unemployment dropped to the lowest level since December 2000 to 4.1%.

Americans have an optimistic view of the economy with confidence hitting the highest level in almost 17 years. The Conference Board consumer confidence index jumped to 125.9 in October from a revised 120.6 in September. Meanwhile, consumer spending, which accounts for more than two-thirds of U.S. economic activity, recorded its biggest increase in more than eight years in September. Retail sales unexpectedly rose 0.2% in October followed by a revised 1.9% jump in September.

Solid Sales Forecast

According to data compiled by the National Retail Federation (NRF), about 69% of shoppers (164 million) plan to binge during the Thanksgiving weekend. Of these shoppers, 20% plan to make their purchases on Thanksgiving Day (32 million) and 70% on Black Friday (115 million), the busiest holiday day. A substantial 43% are expected to shop on Saturday (71 million), 21% to shop on Sunday (35 million), and 48% to shop on Cyber Monday (78 million).