Happy New Year? It Just May Be for Manufacturers.

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Let’s not jinx ourselves, but assuming the calendar doesn’t get thrown off like everything else in 2020, this godawful year will finally end in two weeks. While it will be busy for those involved in the historic Covid-19 vaccine rollout, it feels safe for the rest of us to start thinking about 2021. Here are the big themes that I’m watching:

Recovery Watch: With a vaccine on the horizon, the recent rise in coronavirus cases across the U.S. doesn’t appear to be making much of a dent in the manufacturing rebound. 3M Co. this week said revenue rose 7% on an organic basis in November — in line with October after adjusting for the difference in the number of business days. Most notably, the transportation and electronics segment — which has faced weakness in markets tied to consumer devices and automotive production — had sales growth for the first time since the company began disclosing revenue on a monthly basis in April. Industrial distributor Fastenal Co. said earlier this month that daily sales climbed 6.8% in November, with revenue from manufacturing customers increasing relative to the year-earlier period for the first time since February. That resilience bodes well for what’s set to be a challenging winter of perilous pandemic conditions before an expected strong spring for manufacturing. The fierce rally in industrial stocks over the past month has left analysts split on how much of the good news is already priced in. The manufacturing sector historically tends to underperform after the Institute for Supply Management’s gauges of activity and new orders hit the kind of strong levels seen recently — a buy-the-rumor, sell-the-news phenomenon.

Wolfe Research analyst Nigel Coe thinks the sector may buck the trend this time because the recovery is still in the early stages and valuations (while high) aren’t egregiously out of whack with the broader S&P 500 Index amid a lower-for-longer interest-rate environment. Barclays Plc analyst Julian Mitchell, on the other hand, sees no reason for the historical pattern to change. As terrible as 2020 was, the average revenue drop for industrial companies will only be about half of what the sector saw in 2009, Mitchell estimates. So while there undoubtedly will be a sharp snapback from depressed 2020 numbers, the more muted decline suggests a less dramatic recovery than what the sector experienced after the financial crisis. The manufacturing industry has also changed in the past decade. For one thing, there’s been a series of downturns unique to the sector, most recently in 2015 and 2016 because of the oil-price slump and in 2018 and 2019 because of knock-on effects from the Trump administration’s myriad trade wars. Companies haven’t forgotten that experience, and it’s unlikely they will shell out for the kind of additional factory capacity that would support a more aggressive growth outlook, Mitchell said. After all, when industrial companies do spend these days, it’s usually part of a hard pivot toward software.