U.S. Market Holiday Schedules and Investor Behavior: How Thanksgiving and Black Friday Shape Volatility and Retail Trading

The U.S. stock market's holiday schedule around Thanksgiving and Black Friday creates a unique interplay between reduced liquidity, retail investor behavior, and short-term volatility. With the market closed on Thanksgiving Day and trading for only a half-session on Black Friday, the shortened week has historically amplified price swings and altered trading dynamics. This article examines how these structural closures, combined with evolving retail investor preferences, have shaped market outcomes in recent years-and what this means for investors navigating the holiday season.

Historical Market Patterns and Volatility

The Thanksgiving week has long exhibited a positive bias for broad indices like the S&P 500, which has closed higher approximately 60% of the time since 1928. This trend is often driven by a combination of reduced trading volumes and seasonal optimism. For instance, the index has historically shown modest gains on the Wednesday before Thanksgiving and the half-session on Black Friday, reflecting a lighter but generally upbeat investor mood.

However, the reduced liquidity during this period-trading volumes drop to about 80% of normal levels the day before the holiday and as low as 45% on Black Friday-can exacerbate volatility in thinly traded securities according to market analysis. This dynamic was evident in 2025, when retail investors' concentrated buying in mega-cap tech stocks, such as Meta and Nvidia, created sharp price swings despite the shortened trading window. JPMorgan reported that retail investors poured $8.1 billion into cash equity purchases during the week, far exceeding the 2025 weekly average of $6.2 billion.

Retail Investor Behavior: From Meme Stocks to ETFs

Retail investor activity during Thanksgiving and Black Friday has evolved significantly from the meme-stock frenzy of 2021 to a more diversified approach in 2025. While social media-driven trades in stocks like Beyond Meat and Nokia remain a fixture, there has been a notable shift toward ETFs and alternative assets. In 2025, ETFs accounted for 75% of retail-trader inflows, with the SPDR Gold Shares ETF benefiting from a 60% surge in gold prices year-to-date. This shift suggests a growing preference for diversified, value-oriented strategies among retail investors.

At the same time, AI-related stocks have attracted significant attention. JPMorgan noted that purchases of the 30 top AI stocks outpaced broader market activity, with retail traders favoring names like Nvidia and Tesla amid perceptions of undervaluation. However, this concentration has also introduced risks, as concerns over stretched valuations led to cautious behavior during market dips. For example, retail investors turned net sellers when the Nasdaq fell more than 2% in a single session.

Volatility Metrics and Macroeconomic Factors

The VIX, a key gauge of market volatility, remained elevated during the 2025 holiday season, staying above 20 amid uncertainty around Federal Reserve rate cuts and AI sector valuations. This volatility was compounded by macroeconomic factors such as inflation and tariffs, which influenced both consumer spending and retail investor sentiment. For instance, the S&P 500's forward price-to-earnings ratio of 21.8-well above its 10-year average-highlighted stretched valuations, prompting caution among retail traders.

Academic studies further underscore the role of retail investor activity in amplifying volatility. A 2025 paper on the impact of online discussions on platforms like Reddit and Twitter found that increased social media activity during the holiday season contributed to short-term market fluctuations. This was particularly evident in 2025, when retail investors closely followed "social interest scores" to guide trades in meme stocks and AI names according to market analysis.

Implications for Investors

The interplay between market closures, retail behavior, and volatility presents both opportunities and risks. For institutional investors, the reduced liquidity during Thanksgiving week can create inefficiencies in thinly traded assets, while retail investors' focus on mega-cap tech and ETFs may drive momentum in specific sectors. Meanwhile, the holiday season's impact on consumer spending-projected to surpass $1 trillion in 2025-could bolster retail and consumer discretionary stocks, particularly for off-price retailers like Walmart and TJX Companies.

However, investors must remain cautious. The 2025 experience highlights how retail-driven buying sprees can reverse quickly amid macroeconomic uncertainties. For example, the Santa Claus rally-a historical post-holiday market surge-may be tempered by ongoing concerns about inflation and Fed policy.

Conclusion

The U.S. stock market's holiday schedule around Thanksgiving and Black Friday continues to shape short-term volatility and retail investor behavior in complex ways. Reduced liquidity, combined with evolving retail preferences for ETFs, AI stocks, and meme equities, has created a dynamic trading environment. As the 2025 holiday season demonstrated, investors must balance seasonal optimism with macroeconomic realities and the unpredictable influence of retail trading activity.