Early this week we closed out the month of September, shutting the books on the third quarter. While U.S. stocks rebounded in September, the quarter in full was still a mixed one as evidenced by 1.2% rise in both the S&P 500 and the Dow Jones Industrial Average vs. the Nasdaq Composite Index and the Russell 2000 index, which finished the third quarter in the red.
By comparison the Real Money Post-Industrial Average (RMPIA) shrugged off a modest dip lower in September to close the third quarter up 0.4%. That move higher left RMPIA up 20.9% year to date exiting September, outpacing all four major U.S. stock market indices. RMPIA is a modified market-cap weighted portfolio consisting of 30 of the most important stocks in the market today.
Examining RMPIA's September performance, 13 of its constituents moved higher month over month led by Nike (NKE) , Walgreens Boots Alliance (WBA) , Apple (AAPL) and the sharp rebound in Kraft Heinz (KHC) . Despite those gains, declines at Starbucks (SBUX) , Netflix (NFLX) and Amgen (AMGN) led RMPIA to finish September down 0.2%.
For the third quarter, RMPIA's move higher was powered by double-digit gains in the shares of Apple and CVS Health (CVS) , and the 9% rise in Costco Wholesale (COST) . During the three-month period, 16 of RMPIA's holdings rose, which more than made up for sharp declines at Netflix, Regeneron Pharmaceuticals (REGN) and PayPal Holdings (PAY) .
Over the course of the quarter and in the last few days, the vector and velocity of the global economy has continued to slow with the September ISM Manufacturing Index reigniting concerns for yet another leg down. This is likely to boost expectations for further Fed action later this month at its next FOMC meeting.
Because the U.S. June quarter GDP print of 2.0% hinged on consumer spending, investors will be picking over data in the coming weeks to determine if consumers are willing and able to dig deeper into their wallets as we approach the holiday shopping season. We'll soon be getting the usual flurry of year-end holiday shopping forecasts and initial ones received point to further spending growth ahead. With RMPIA's holdings in Amazon (AMZN) , Costco, MasterCard (MA) , PayPal, Nike, Kraft Heinz, and Starbucks, the index is in a good position to capture any incremental spending bump on gifts or "season's eatings."
In two weeks, investors will be staring down a plethora of corporate earnings, which run a high probability of disappointing as companies update their guidance to contend with the slowing global economy and continued U.S.-China trade war. Meanwhile, with the World Trade Organization's decision on EU aircraft subsidies leading to $7.5 billion in new U.S. tariffs on EU imports, the uncertain trade situation has become more tense ahead of the next round of U.S.-China talks to be held Oct. 10-11.
Early indications are favorable for Apple's latest iPhone models, and that should benefit Broadcom (AVGO) , but we still see a far greater iPhone upgrade cycle ahead tied to the eventual 5G model. That debut as well as other 5G smartphone models offer a favorable outlook for RMPIA constituent Qualcomm (QCOM) .
