S&P 500 Index opens lower as economic uncertainty persists. After rallying to start the week following a strong services sector reading on Monday, US stocks are following global equities lower Tuesday morning. Most major Asian indexes fell overnight, although Chinese shares extended recent gains, while European shares were broadly lower. A global pickup in COVID-19 cases is raising new concerns about the pace of the economic recovery.
Another solid quarter for bonds. The Bloomberg Barclays Aggregate Bond Index returned a solid 2.9% in the second quarter, its eighth consecutive quarter of gains and best two-year number since 2010. Economically sensitive bond sectors led, but most are still in negative territory year to date. We expect gains to be limited for core bonds over the rest of 2020 and into 2021. We continue to favor mortgage-backed securities for their combination of reasonable income, solid relative valuations, and resilience if rates rise. Read our review of fixed income markets in the second quarter in today’s LPL Research blog.
COVID-19 news. On Monday, US new daily cases rose 8.7% week over week to 45,000, well below the near 35% weekly increase reported July 3 (Source: Johns Hopkins). Despite a drop in reported tests over the week, the curve for the latest wave appears to be flattening. Bloomberg reported new cases in Beijing fell to zero for the first time in 26 days. Australia’s second largest city, Melbourne, was put back on lockdown amid rising infections (Source: COVID-19 Tracking Project).
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.
A mortgage-backed security (MBS) is a type of asset-backed security that is secured by a mortgage, or more commonly a collection (“pool”) of sometimes hundreds of mortgages. The mortgages are sold to a financial institution (a government agency or investment bank) that “securitizes”, or packages, the loans together into a security that can be sold to investors. The structure of the MBS may be known as “pass-through”, where the interest and principal payments from the borrower or homebuyer pass through it to the MBS holder, or it may be more complex, made up of a pool of other MBSs.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
All index and market data are from FactSet and MarketWatch.
This Research material was prepared by LPL Financial, LLC.
Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).
Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.
- Not Insured by FDIC/NCUA or Any Other Government Agency
- Not Bank/Credit Union Guaranteed
- Not Bank/Credit Union Deposits or Obligations
- May Lose Value
For Public Use – Tracking 1-05030331