2020 in Review: What a Long, Strange Trip It’s Been
December 17, 2020 |
The C2FO Team
This quarter-by-quarter review examines the dramatic events of the past year and what they portend for the future.
Years from now, when you look back on 2020, it’s doubtful you’ll be filled with warm and fuzzy memories.
Still, the dramatic events of the past 12 months make 2020 the most dynamic year of most of our lives — one likely to have far-reaching consequences for business and society.
Like 1918, 1941 or 1968, the year 2020 was a watershed moment in time that presented great adversity, unprecedented turmoil and profound challenges for the future. Life in December 2020 is quite different from the way it was back in January — and may never quite be the same again. To paraphrase an old Grateful Dead song, what a long, strange trip 2020 has been.
What follows is a quarter-by-quarter account of the highs, lows and remarkable events of 2020 — and how they all affected business and finance:
First Quarter: An End to Normalcy
Heading into 2020, the main concern among economic experts was that the world might be on the brink of a recession. Tariffs and a possible trade war between the United States and China were another big topic.
Still, the economy started the year strong: the US added a better-than-expected 225,000 jobs in January, with unemployment at 3.6%. The International Monetary Fund projected that the world economy would grow 3.3% in 2020, up from 2.9% in 2019.
Worries began to grow about the COVID-19 novel coronavirus emerging out of Wuhan, China. On Jan. 29, Trump Administration trade advisor Peter Navarro issued a memo warning that the virus could “evolve into a full-blown pandemic.”
That’s exactly what happened in February and March, as COVID-19 infections spread across Europe and the United States, causing a wave of business closures, shutdowns and stay-at-home orders. The US entered a recession in February, with unemployment rising to 14.7% by early April. During the week of March 9, claims for unemployment benefits jumped from 70,000 to 281,000. Globally, real gross domestic product for the G20 group of countries dropped by 3.4% in the first quarter — the largest decline since 1998.
As more US states enforced stay-at-home orders, many non-essential categories saw significant drops in their revenues. Industries like apparel, electrical equipment and technology hardware saw a big impact. At the same time, however, other businesses like big-box stores, grocery chains and delivery services saw a spike in demand as consumers loaded up on essential goods and hunkered down for the “new normal” of quarantines and working from home.
Governments and central banks began to take action, including a $2.2 billion CARES Act stimulus package passed by Congress and signed by President Trump on March 27.
Second Quarter: Economic Fallout and Social Movements
The second quarter of 2020 proved historic on many levels.
Overall consumer spending contracted at a record pace due to the pandemic. Once COVID-19 thrust the US into lockdown in mid-March, there was a continuous economic decline that would not reach bottom until May, around the time states began implementing phased re-openings.
Thousands of small to mid-sized businesses began closing during the second quarter — Yelp! estimates over 97,000 businesses on the review site have shut down permanently since the pandemic started. Funding through government initiatives like the Paycheck Protection Program came too late for many business owners. In April, C2FO Founder and CEO Sandy Kemper published an open letter to governments and central banks, proposing the creation of a Small Business Supplier Protection Plan, helping larger companies to provide immediate low-cost funding to their small- to mid-sized business (SMB) vendors worldwide.
Amidst the economic turmoil came a major turning point in the dialogue about race in the US and many other parts of the world. On May 25, following soon after the deaths of Ahmaud Arbery, Breonna Taylor and others, a viral video revealed the death of George Floyd at the hands of Minneapolis police.
Within days, the world erupted in protest. As people of all ethnicities and backgrounds demanded racial justice, companies quickly responded with statements condemning racism and new initiatives to help combat it. Many corporations already had programs aimed at diversity and inclusion, but the events of May and June of 2020 caused leading companies to reexamine and expand efforts to promote diversity in their workforces and communities, and provide stronger support for minority-owned businesses.
Third Quarter: The Recovery Begins
After bottoming out in May, the US economy grew at a record 33.1% pace in the third quarter, recovering about two-thirds of the ground it lost during the spring, according to data from the Bureau of Economic Analysis. The swift return to somewhat normal economic levels can be attributed to increased consumer spending in areas like health care, food services, the auto industry and retail.
Stimulus programs and the reopening of the global economy as governments lifted restrictions contributed to a third quarter rebound. As workplaces around the world returned to life, many employers faced the uncertainty of how to lead in the “new normal” of the pandemic, as well as the challenging landscape of bringing workers back into the office.
Did Q3’s encouraging economic numbers signal a return to the good old days of low unemployment, strong consumer confidence and continued GDP growth? C2FO’s September webinar with economic analyst Eric Kelley of UMB Bank predicted that a true recovery was underway, but the stability of the pre-pandemic days might not return until late 2021 or 2022.
Fourth Quarter: Hope and Uncertainty
Despite taking several days to determine a winner of the US presidential election — and the incumbent’s refusal to concede defeat — the stock market responded to Joe Biden’s victory by climbing 12% in November, its best month since 1987.
The December approval and shipments of the initial COVID-19 vaccines in many countries also fueled hopes that the pandemic will ease next year as more people are inoculated. At the same time, however, a holiday season spike in coronavirus cases has triggered new stay-at-home orders and other restrictions in the US and Europe. Even with the promise of vaccines on the horizon, the next few months remain uncertain.
All eyes are on the holiday shopping season, and Deloitte analysts say consumers are on track to spend as much on holiday gift-giving as in 2019, even if how and what they spend their money on shifts. As consumers cut back on travel and experiences, spending on retail, home entertainment and electronics are expected to benefit.
Heading into 2021, economic experts are hopeful that the global economy has already turned a corner and will continue to improve. However, the uncertainties of 2020 — fresh coronavirus outbreaks, partisan politics in the US and social unrest in many parts of the world — will remain with us well into the new year.
The dramatic events of 2020 — and the roller coaster economy that accompanied them — have had a profound impact on how companies operate today and how they will craft blueprints for tomorrow. Self-isolation, economic anxiety, social distancing and working from home have altered consumer behavior and led to broad implications for how companies will move forward, post-pandemic.
Will 2021 bring more financial stability than 2020? No one can say for certain.
However, companies that prepare for various scenarios and outcomes, and those that have enough working capital on hand to endure the unexpected, will be best positioned to thrive in 2021 and beyond. Likewise, companies that embrace Environmental, Social and Corporate Governance (ESG) programs for themselves and their customers will have an advantage over those organizations that remain locked into the old ways of doing business.
As trying a period as 2020 has been, it has provided some valuable lessons for individuals and businesses. Here’s hoping we are all able to put what we’ve learned this year to work in 2021.