This story first appeared in the October 17, 2014 issue of WWD. Subscribe Today.

The “October effect” has arrived and, while U.S. stock markets fell only slightly Thursday — along with retail shares — the feeling is that the month will follow the historic norm and global markets will be lackluster, if not downright scary.

The question is how that will impact the holiday shopping season, which is only 42 days — and counting — away.

There certainly are enough crises to create uncertainties, ranging from the Ebola epidemic to deflationary pressures in Europe to worries over job creation in the U.S. Those are on top of ongoing pressure on discretionary incomes in the U.S., at least, where real wage growth has been invisible.

For most observers at this point, the key to holiday will be the employment picture.

Scott Hoyt, senior director of consumer economics at Moody’s Analytics, said, “As long as jobs are being generated and consumers have income, those issues shouldn’t get severe. You’ll need a change in the trajectory of the economy before you see an impact on the ability of the consumer to spend and on businesses.”

Hoyt also said it would be “difficult for the herd mentality to kick in even if there was growing Ebola concerns when the economy is generating 150,000 jobs a month, and right now, it’s at a comfortable rate of 200,000 jobs a month.”

Even if consumers’ moods aren’t darkened by Ebola, ISIS and other crises, analysts are already certain of one thing: It’s going to be a holiday more price-promotional than ever. Online promotions already have begun and stores are planning to open earlier than ever on Thanksgiving Day, including Macy’s Inc., which will open its doors at 6 p.m. So shoppers might start thinking of “Thanksgiving lunch” rather than “Thanksgiving dinner.”

Jeffrey Edelman, former retail analyst and now director of retail and consumer products advisory services at financial services firm McGladrey LLP, said some retailers are already getting a jump on early holiday sales through friends-and-family days. Edelman, who was in Saks Fifth Avenue’s Manhattan flagship Thursday, noted that the retailer was offering 25 percent off for its friends-and-family sale, up from 20 percent the past few years. Lord & Taylor is having a similar promotion for friends and family and Bloomingdale’s is expected to hold one shortly.

“These are the price wars for holiday. There may be less overall promotions in some respects, but you’ve got more of these events. Everyone is going after market share….If you look at cargo data, container deliveries are down over the previous year, which means inventories are lean and the promotions are planned,” he said.

Clouds are already looming for luxury firms such as Burberry, LVMH Moët Hennessy Louis Vuitton and Mulberry, all of which on Wednesday warned about the uncertain economic environment. But what may be a concern for the brands could be an opportunity for investors to jump in. Luca Solca, managing director at Exane BNP Paribas, said growing turmoil in Eastern Europe, protests in Hong Kong, ISIS and slower gross domestic product growth in China suggest a “perfect storm” closing in on the luxury goods sector, adding that these storms create value opportunities in the luxury goods sector.

John Lonski, team managing director of the economics group at Moody’s Analytics, noted that in late 1998 and early 1999, with the “financial crises in East Asia and Russia going into default, the U.S. grew more than 4 percent annually, thanks in part to the reduction in the price of gasoline and lower borrowing costs. [Now] the 30-year mortgage yield has dipped under 4 percent for the first time since June 2013 and interest rates for bonds are down. Hopefully the equity markets will stabilize and if fuel costs remain low and bond yields are low, it could be a better-than-expected holiday season.”

Still, a volatile stock market, especially if prolonged, could get unnerving for everyone.

The WWD Global Stock Tracker slipped 0.4 percent to 96.02 on Thursday, while the Dow Jones Industrial Average dipped 0.2 percent to 16,117.24, as St. Louis Federal Reserve president James Bullard suggested that the tapering of quantitative easing be put temporarily on hold to see “how the data shakes out into December.”

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To be sure, October has never been the best month for the equity markets — recall the market crashes in 1929, 1987 and 2008, all in October — and the volatility index, or the VIX, is again on the rise. And with the markets doing so well over the summer, it was a safe bet that a correction was going to occur at some point. But is the current roller-coaster ride more a function of the Ides of October or a hint of something more prolonged on the horizon?

Edelman said the “stock market is 90 percent psychology. There are so many traders out there. When the market is up, everyone is chasing it going up and when it moves down, you’ll see selling and taking of some profits. Hedge funds have also been realizing a lot of losses this month and I wouldn’t be surprised if they’re more aggressively trying to recoup some of that.”

According to Calvin Silva, retail analyst with Nasdaq Advisory Services, his talks with money managers in the discretionary space indicate that mutual fund managers and pension plan investors have been selective in what stocks they are buying, suggesting that “there is some support out there in the future.” The key could be with the upcoming earnings season, where company reports of results could become a major catalyst for whether there is a prolonged pullback from equity investors, Silva concluded.

Lonski said, “I would proceed with caution, but panic is not warranted.”

The U.S. is seeing the strongest numbers for the economy based in part on the fewest weekly jobless claims since April 2000, he said. The biggest risk right now is the possible importation of wage and price deflation from Europe. For now, the outlook for holiday shopping is helped by lower gasoline costs and an improving labor market.

Oil prices this week are in the $85-a-barrel range, the lowest since 2010. That’s likely good news for U.S. consumers, who are seeing the average price per gallon of gas in the $3.21 range, according to the U.S. Energy Information Administration on Monday. While prices at the pump are 9 cents lower than a week ago, they are 15 cents lower than two weeks ago, the EIA said. Any decrease helps to offset rising costs for health care and housing.

If volatility in the equity markets weighs down the retail sector in the form of a cycle of promotions and deteriorating margins, that could bode well for investment bankers next year.

According to Nasdaq’s Silva, the result could be an increase in mergers and acquisitions activity. “The scenario is ripe for M&A activity. With interest rates low and potential suitors with clean balance sheets, there is room to lever up,” the Nasdaq analyst said.

Ebola is still the wild card, even as Lonski noted that the U.S. hasn’t “endured an epidemic of this severity since the Spanish flu of World War I.” And while it could throw a wet blanket over the holiday shopping season, Lonski said it’s too soon for that conclusion. “Clearly if we had a breakout here that could disrupt a lot of economic activity, such as people’s willingness to go shopping or travel to go to work. There are some pretty dour scenarios that you could come up with,” noting that things would have to get bad really fast — a low probability — to impact the upcoming holiday season.

A research note last week from Helen Brand, analyst at Barclays, on the potential impact of Ebola said, “A comparison with the SARS outbreak of 2002-03 suggests that luxury stocks would see a short, sharp negative impact, with wholesale and hard luxury names the hardest hit and leather goods more resilient.”

Natalie Kotlyar, a partner at financial services firm BDO USA, said “in a declining or volatile stock market, [which] can directly and negatively impact consumer confidence, [we would likely] expect to see the biggest impact in near-luxury or aspirational luxury spending.”

French President François Hollande on Thursday blamed the market jitters on international political crises and the persistent weakness of the European economy.

“The [weakness] we have seen for several days in European and even U.S. markets is due to two major causes. The first is the instability of the international situation, the uncertainties — what is happening in Ukraine, what is happening in the Middle East, in Syria, in Iraq, and also what is happening in West Africa with the Ebola virus,” he said on the sidelines of a summit of European and Asian leaders in Milan.

“But there are also causes inherent to Europe, in other words having such weak growth, having questions and doubts about the investment plan that needs to be put into place. In addition, having one austerity plan on top of the other creates doubt in the marketplace,” he added, calling for action to spur European growth.

The French leader revealed that, beginning on Friday, travelers arriving in French airports from Guinea would be screened for Ebola, in an effort to strengthen measures to stop the deadly virus from spreading. Hollande said he had telephone conversations about combating the virus with U.S. President Obama, German Chancellor Angela Merkel, Italian Prime Minister Matteo Renzi and British Prime Minister David Cameron.

In the U.S., screening for the temperatures of passengers from three West African countries began on Thursday at airports in Washington, Chicago, Atlanta and Newark. Screenings of travelers using New York’s John F. Kennedy International Airport began on Saturday.

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