The strong stock market in 2020 has been one of the biggest surprises in a year full of them, and we've heard the explanations, from massive Federal Reserve interventions to bored sports bettors discovering stock trading.
But the reality is the businesses of big companies have held up pretty well in what has been described as the worst economy since the 1930s.
Part of the explanation for how public companies are doing OK is simply that they tend to be bigger. It's so costly to be publicly held in 2020 that the small public company looks increasingly like an endangered species.
The Wilshire 5000 stock index, meant to capture all the American public companies with easily found trading data, once had more than 7,500 names in it but hasn't had even 5,000 for 15 years.
Even as COVID-19 first disrupted business this spring, there was talk about how big companies were in better position to get through the downturn than small businesses were.
Big companies had the capital to invest in technology that made work from home easier and enabled new ways to distribute their products, including direct to the customer. They had more management bandwidth to solve problems like keeping staff safe in the facilities.
UnitedHealth Group of Minnetonka, the biggest player in America's health insurance industry, is having a growth year, and its stock has traded pretty much in line with broader market averages like the S&P 500. Retailers Target and Best Buy Co. are both expected to have growth years, at least according to the fiscal-year revenue estimates of securities analysts.
St. Paul-based Ecolab is among the big companies that did feel financial pain as the pandemic spread, given that a lot of its sales comes from providing cleaning products and services to hotel operators and restaurants, businesses badly hurt by the pandemic. Ecolab took a $38 million hit in its second quarter just from voluntarily suspending the collection of lease payments on dishwashing equipment used by its customers.
Yet Ecolab stock is up for the year. In a year with a terrible infectious disease, investors apparently want to bet on the future of a Fortune 500 company in the business of helping customers clean and sanitize.
3M Co. of Maplewood is one of those bellwethers the analysts will talk about on TV, an industrial company with products in so many markets that it's a proxy for the overall health of the global industrial economy. And as of last check, its sales were expected to be down just slightly for the year.
It also looked like it was going to be a challenging year for C.H. Robinson Worldwide, based in Eden Prairie, a giant in the market of providing third-party logistics services, as the pandemic seemed likely to break long supply chains.
It remains to be seen how much of a blow the pandemic has delivered to globalization. But as of the last forecast, C.H. Robinson's annual revenue is expected to come in this year pretty much in line with what it reported last year. The company's stock has outperformed the broader market this year.
One conclusion is that the goods-producing economy (after plenty of interruptions) has done OK this year. What has really suffered, and continues to suffer, is the services economy, particularly businesses that have people delivering service personally to another person.
These are full-service bars and restaurants, beauty salons, fitness centers and high-service retail. And businesses in that broad area of the economy generally are not traded on the New York Stock Exchange.
It's easy to see what has been happening to the services economy in the state employment numbers. More than one in four workers in the leisure and hospitality segment were out of a job as of August.
And a lot of those are workers who had been employed at small businesses.
As of mid-September, small-business revenue in the state had begun to perk up a bit, according to the new data tracker published by the economists at Opportunity Insights, although it was still down by more than 13% since the start of the year. But leisure and hospitality small-business revenue in Minnesota was still off more than 40%.
Sales down just 40% would be fine for many members of the Metro Independent Business Alliance, said Executive Director Mike Brown, as he has consistently heard reports of sales this summer with Twin Cities restaurants well below half of normal. And, of course, that's with the benefit of summer outdoor dining on patios, sidewalks and parking lots.
"These business owners need time and they need money," said Brown. "And they have neither."
Of course, this is not just a regional problem. More than 160,000 businesses on the consumer reviews and reservation system Yelp have closed since March 1, nearly 100,000 of them shutting for good.
There are enough public companies in the services sector to use their performance for a sense of how painful it must be for the small businesses in some of these highly fragmented markets. The publicly held fitness company Planet Fitness, for example, is expected to show a full-year revenue decline of 38%, according to analysts.
How is it going in the hair salon business? About what you would expect, based on the results of Regis Corp., headquartered here in the Twin Cities.
Systemwide revenue, meaning it includes sales of franchisees, declined nearly 75% in the quarter ended in June, Regis reported a month ago, as it lost money for the quarter. It's no surprise that the shares of Regis are off more than 66% for the year so far.
There are, of course, very big companies in the entertainment business, maybe none bigger than the Walt Disney Co., and its stock is only off about 14% this year.
Yet this week Disney finally yielded to the inevitable and announced the layoff of 28,000 full- and part-time workers at its theme parks in Florida and California.