The Bloomberg Barclays US Aggregate Bond Index posted a solid total return of 2.9% in the second quarter of 2020, its eighth consecutive quarterly gain, and a relatively strong quarter for the broad investment-grade bond index considering the outsized stock market gains over the quarter.

The index is up slightly more than 17% over those eight quarters, the best two-year stretch since 2010. As shown in the LPL Chart of the Day, more economically sensitive sectors (high-yield corporates, bank loans, emerging market debt) led in the second quarter of 2020, but even Treasuries advanced and investment-grade corporate bonds held their

2020 is an election year, and as we get closer to November, we expect this to replace COVID-19 and the recession at the top of investors’ minds. The makeup of Congress may influence stock market performance, and how stocks and the economy perform prior to the election may forecast who will win.

The Makeup of Congress Is Very Important

Although all election years feel different, 2020 no doubt may be one of the most unique election years ever. We have a pandemic, a deep recession, extremely heightened partisanship, a mail-in ballot controversy, an unpredictable president, and the oldest presidential candidate ever.

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Following the massive beat in May nonfarm payrolls, many wondered if last month’s job gains pulled forward hiring ahead of the expiration of the Paycheck Protection Program to ensure small business loans were forgivable. Recall that the US labor market added 2.5 million jobs in May (revised up to 2.7 million in the June report) versus Bloomberg consensus expectations for a loss of 7.5 million jobs.

The June report helped put those concerns to rest, as the US economy added 4.8 million jobs, surpassing Bloomberg’s median consensus estimate of 3.2 million. As shown in the LPL Chart of the Day, nonfarm payrolls have been

Index Performance – As of 1:00 PM, 7/2/20

S&P 500 Index: 2.0%

Dow Jones Industrial Average: 0.9 %

Nasdaq Composite: 2.4 %

Equities

US equities delivered very strong gains during the shortened trading week. Like their larger counterparts, indexes representing both the small and mid-cap space were higher.

All major sectors were in the green this week; Real estate, consumer discretionary, and communication services were the top performers. Large cap growth outperformed value by more than 1% this week.

The S&P 500 Index gained 20% in the second quarter of 2020 for its best