Amazon, Target, and Walmart Should Dominate 2021

Amazon Founder, Chief Executive Officer, and President Jeff Bezos

It’s “last call” for stocks in 2020 as the year’s final week of trading gets underway. Armed with a new stimulus bill (signed by President Trump over the weekend), bulls are back. The major indexes are all up as of noon today after setting record highs.

In response to the bill, Wall Street’s improved its economic outlook as well. Goldman Sachs just upgraded its Q1 2021 GDP growth estimate from +3% to +5%. In previous forecasts, Goldman analysts assumed a $700 billion stimulus package was on its way.

Instead, a larger $900 billion bill (4% of GDP) was passed. Strategists anticipate a surge in disposable income as a result.

“We now expect a significantly larger rise in disposable income in Q1,” wrote Goldman analysts in a note to clients, before also cautioning investors to temper their initial stimulus excitement.

“Due to the virus resurgence, we expect that the spending impact of this large increase in income will be more lagged than usual.”

In other words, Goldman’s not sure when the “pent up demand” – something economists have been referencing for months – will truly be unleashed. There’s no modern precedent for a Covid-19 economy.

That should make timing the next consumer spending frenzy a tough endeavor. And we certainly didn’t see one this holiday season.

According to data from Mastercard (NYSE: MA), online sales surged 49% year-over-year (YOY) in the U.S. from October 11th – December 24th.

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“It’s a very healthy number,” said Steve Sadove, senior adviser for Mastercard.

“That shows me the American consumer is highly resilient.”

However, overall retail sales during that period only increased 3% YOY. The National Retail Federation, America’s largest retail trade group, expected sales to rise by 3.6% – 5.2%.

In that regard, it was a disappointing holiday season for retailers, and by no means an “uncorking” of pent-up demand. Companies focused on e-commerce, on the other hand, had a very merry Christmas.

Amazon (NASDAQ: AMZN) was even credited by Mastercard for starting the holiday shopping season early when CEO Jeff Bezos & Co. pushed Prime Day to mid-October.

Armed with new stimulus checks, consumers are likely to go back to those same online retailers in 2021.

Especially as Covid-19 infection totals continue to rise, keeping shoppers out of brick-and-mortar stores.

That could further skewer smaller shops and department stores if the current coronavirus trends persist through Q1. Vaccines, while highly effective, will still take some time to roll out in mass quantities.

And that’s assuming everyone will want to take them.

Polls out of Europe show a surprising vaccine reluctance among the general population. In a Polish survey, only half of the medical staff at a Warsaw hospital said they’d be injected. Similarly, only 41% of the French citizens who responded to an Institut Français D’opinion Publique (IFOP) poll planned on being vaccinated.

In the U.S., Americans are likely far more skeptical.

So, while the vaccines may seem like a “silver bullet” solution for the Covid problem, the truth is that there is still plenty of uncertainty surrounding their practical use.

That could keep Western economies locked-up longer than expected, ultimately helping e-commerce giants like Amazon, Target (NYSE: TGT), and Walmart (NYSE: WMT) rake-in even more dough as time goes on.

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