We closed the books last week on the third quarter of 2020, which ended on a whimper as September saw all the major U.S. stock market indexes give back a portion of their August gains. Fueling the declines were renewed concerns surrounding the pandemic and its impact on the global economy, the lack of a fiscal stimulus deal, and risks of a contested U.S. 2020 presidential election.
But despite that weak month, the Real Money Post Industrial Average continued to outperform the majority of major market U.S. equity indexes. For the quarter in full, the indices rose between 5.3%-9.4% with the Russell 2000 bookending on the low end while the Nasdaq Composite Index led the pack and the S&P 500 as well as the Dow Jones Industrial Average in between the two.
By comparison, despite a setback during the September quarter the Real Money Post Industrial Average (RMPIA) rose 13.8% during the September quarter leaving it up just shy of 29% on a year-to-date basis compared to 8.3% for the S&P 500 and down 0.4% for the Dow. Propelling RMPIA during the third quarter, just over half of its constituents climbed faster than the S&P 500. Leading the pack were shares of Salesforce (CRM) , Apple (AAPL) , Nike (NKE) and Thermo Fischer Scientific (TMO). The 20% gains for those four holdings were mitigated by the quarter's declines at CVS Health (CVS) , Gilead Sciences (GILD) , Regeneron Pharmaceuticals (REGN) and Walgreens Boots Alliance (WBA) .
Taking a longer view and examining RMPIA on a year-to-date basis, here, too, it continues to best the S&P 500 and the Dow. Compared to the 8.3% gain for the S&P 500 for the first nine months of 2020, 18 of RMPIA's constituents outperformed that index. Leading the pack were RMPIA constituents like Amazon (AMZN) , Apple, Adobe Systems (ADBE) , Netflix (NFLX) and PayPal (PYPL) , whose business models were accelerated by the structural shifts in how we work, play and live as a result of the Covid-19 pandemic. Offsetting those and other positive moves were declines at CVS Health (CVS) and Walgreens Boots as well as Booking Holdings (BKNG) , which saw its business disrupted as a result of the pandemic hitting both travel and leisure spending as well as corporate travel.
Soon the quarterly earnings season will be upon us, which in some cases will bring positive confirmation points, while in other case, we could see a resetting of expectations. As the velocity of those earnings reports heats up and wanes, we will see the seasonal surge in consumer spending unfold given Halloween, Thanksgiving, Christmas and other year-end holidays. Deloitte is forecasting a 1% to 1.5% year-over-year sales increase this holiday season, with total retail sales expected to be $1.147 billion to $1.152 billion between November 2020 and January 2021. E-commerce sales during the period are projected to climb 20%-25%, reaching $182 billion-$196 billion.
That uptick in spending will benefit a number of RMPIA constituents including Amazon, Costco Wholesale (COST) , Starbucks (SBUX) , Mastercard (MA) and others. Kicking it off will be Amazon's 2020 Prime Day slated for Oct. 13-14. And while Apple has yet to confirm an exact date for its 2020 iPhone event, in keeping with the past it will likely be before Apple reports its quarterly results on Oct. 29. With Apple widely expected to debut at least one 5G iPhone model, many see this as kick starting the 5G smartphone upgrade cycle that will drive demand for Qualcomm (QCOM) and Broadcom (AVGO) . Those and other data points keep me bullish that RMPIA will once again outperform in 2020.
(AMZN, MA, SBUX, AVGO, CVS, NKE, AAPL, and CRM are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
