Pandemic doesn't slow stock market's record-setting run in 2020

The pandemic — and the pain that has come along with it for millions of families, small businesses, and bars and restaurants — didn't slow the stock market in 2020.

Sure, it did take a toll on the shares of some Columbus companies, but shares of other companies flourished last year as consumers began working from home and stocked up on groceries and sanitizer rather than going out to eat.

 "It's the craziest year," said Greg McBride, Bankrate.com's chief financial analyst.

COVID-19 has devastated large swaths of the economy — travel, lodging, small storefronts, spectator sports, entertainment, among them — while other parts of the economy are going gangbusters, including companies in technology and health care, said Chip Elliott, senior editor of Columbus-based investment newsletter Market Witch.

"About half the U.S. is ... unemployed, facing poverty, hunger and eviction, and about half is doing very well, adapting into a New Era, with plenty of discretionary income," he said. "I don't ever remember anything like this."

The record highs that market indices regularly hit in the final months of 2020, however, don't reflect just how strange a year it was.

When COVID-19 put the economy in a recession in March, the Standard & Poor's 500 index of the biggest 500 public companies tanked, with the index falling by about a third over the course of just a few weeks. Since then, the S&P 500 has jumped about 65%.

The tech-heavy Nasdaq market has nearly doubled off the market lows in March, and the Dow Jones industrial average of 30 big, well-known companies has rebounded more than 50%.

As of Tuesday's market close, the S&P was up 15.4% for 2020, the Dow was 6.3% higher and the Nasdaq was the big winner with a 43.2% gain.

The big drop in March likely overstated how bad things were while the rally since is more than what would be expected, said Brad Zellar, the top investment officer at Newark-based Park National Bank.

"That's not anything new," Zellar said. "Investors get too fearful when perceptions are not good and too greedy when you start to see a recovery."

Governments and central banks responded to the crisis with an unprecedented stimulus to keep the economy afloat.

That response sent markets jumping, and encouraged investors to take more risks, Zellar said.

The coronavirus, meanwhile, has changed how consumers work, eat and live. 

"There's been accelerated migration toward technology and digital during the pandemic," McBride said. "We've probably moved forward nine years in the past nine months."

Workers spending more time at home have made investments in technology to handle their jobs and communicate with clients and coworkers. Rather than eating out, they are going to grocery stores or having restaurants deliver food to them.

Families are putting more money into their home or buying a new one because they need more space or they want to improve the space they have.

Shares of Marysville-based Scotts Miracle-Gro, one of the biggest gainers in 2020 among central Ohio companies, went up more than 80% after jumping 72% in 2019.

In its quarter that covered July, August and September, Scotts sold $497.2 million in consumer products, 90% more than during the same stretch the previous year.

Homeowners bought Miracle-Gro Performance Organic products, Ortho GroundClear and Scotts Turf Builder Triple Action, "all of them home runs," Scotts Chairman and CEO Jim Hagedorn said in November when the company's results were released.

Elliott said Scotts is a beneficiary of the stay-at-home shift along with providing products that help the growing legal marijuana business throughout the U.S.

"There are no downsides to this, and there might not be for four or five or 10 years," he said. "The shares took off in late spring 2020 and look like they are expensive now, but they are not."

Columbus homebuilder M/I Homes shattered records during the third quarter, the most-recent quarter where it has reported results. For the three months that ended Sept. 30, contracts for the company's homes rose 71% and revenue was up 30% from a year ago, to record levels for the quarter.

M/I shares rallied about 16% in 2020 after jumping nearly 90% in 2019.

Installed Building Products, another company tied to home construction, had another strong year with shares up about 50% after they doubled in 2019.

"The money were not spending in traveling or going to concerts and ball games was instead spent at home, enhancing the functionality of home or the pleasure of people looking out the window," McBride said.

Shares of L Brands, which have had a couple of rough years, doubled in 2020, not because of Victoria's Secret that it almost sold, but because of strong demand for soap and hand sanitizer from Bath & Body Works.

"It's one of those situations that they've lucked into," Zellar said.

Big Lots shares jumped 55% in 2020, as consumers bought groceries, furniture and other items for their home

Meanwhile, more traditional brick and mortar retailers, including those based in Columbus, continue to suffer.

Shares of Express and mall operator Washington fell below $1, and shoe retailer Designer Brands had its shares cut in half in 2020.

Bank stocks, including Huntington Bancshares, didn't perform well, dragged down by super-low interest rates that hurt profit.

Last year also marked the addition of public companies either based in Columbus or with major operations in here.

Homegrown insurer Root went public in October, though its shares have struggled since then, falling from $27 where they started trading to $16.88 on Tuesday.

Elliott said Root is "likely an idea whose time has come in that all of younger America handles everything via smartphone." 

Upstart, a San Francisco-based financial technology company that believes artificial intelligence technology can be used to better price affordable credit, went public last month. The company has its second headquarters in Columbus

Bark, best known for its monthly dog treat and toy delivery service known as BarkBox, also is preparing to go public. The company has its customer service and other operations in Franklinton.

How strong will markets be in 2021? No one thought about the coronavirus a year ago and its potential for disrupting the economy.

Zellar believes the markets are fairly valued now, but once the pandemic subsides and vaccines prove to be effective, job growth and earnings could be much stronger, especially in the latter months of 2021.

Assuming the return to some semblance of normalcy, which would include the resumption of travel and going to ballgames and concerts, stock markets could be higher a year from now even after the big runs in 2020, McBride said.

But it is important to remember the families that face evictions, default and delinquencies caused by the coronavirus, he said.

"There are tens of millions of families who are suffering."