3 Keys to the 2021 Second Half: Dividend Stocks | Lord Abbett
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Equity Perspectives

Lord Abbett Portfolio Manager Darnell Azeez looks at the factors that could influence dividend-paying stocks in the second half. 

Transcript

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[LOWER THIRD: Darnell Azeez, Managing Director & Portfolio Manager] My name is Darnell Azeez, head of value equities here at Lord Abbett and portfolio manager for our dividend-focused strategies.

[LOWER THIRD: Key #1: Developments in U.S. inflation and interest rates.] Clearly, we've had tremendous year-over-year economic growth lapping the COVID-19 outbreak, and the subsequent reopening that we've had this has led to a pickup an economic growth, globally, which has also led to a rise in inflation expectations and a pickup in interest rates from extraordinarily low levels last year. As a result, we've seen economically sensitive value stocks, particularly, rally quite sharply post the [November 2020] vaccine news so we'll be paying close attention to see if that is in fact sustainable in the second half of the year.

We had a number of different commodity markets inflect positively and [see] strong inflationary pressure. The big area will certainly be wages. If we get upward pressure on wages that might in fact lead to more sticky inflation and then higher interest rates which can potentially be a negative for the market, but in the short run a positive for economically sensitive value stocks.

[LOWER THIRD: Key #1: Corporate pricing power.] The second area that will pay close attention to just on the individual company level as you want to find companies that have pricing power companies that are able to pass along rising input costs city and customers and, while also maintaining margins, they may be able to do that by raising prices, but they may also be able to maintain margins by productivity enhancements and expenses that may have been cut during the downturn.

[LOWER THIRD: Key #1: Earnings prospects.] And then lastly we'll be looking at how this all plays out into earnings. So earnings expectations have risen quite a bit post-pandemic, the question was is how much of that is already been priced in. We do think there may be some earnings upside based on the companies that we look, at given in pricing power and productivity enhancements. But as we go through the second, third and fourth quarter earnings seasons we will see exactly how much companies are able to beat expectations.

So those would be the things we will be paying close attention to, again: inflation and interest rate outlook; the potential pricing power of companies; and earnings expectations heading into the back half of the year.

00:03:27.570 --> 00:03:28.410

Thank you for listening.

Disclosure

Unless otherwise noted, all discussions are based on U.S. markets and U.S. monetary and fiscal policies.

Asset allocation or diversification does not guarantee a profit or protect against loss in declining markets.

No investing strategy can overcome all market volatility or guarantee future results.

Market forecasts and projections are based on current market conditions and are subject to change without notice. Projections should not be considered a guarantee.

Generally, when interest rates rise, the prices of debt securities fall, and when interest rates fall, prices generally rise. The value of investments in equity securities will fluctuate in response to general economic conditions and to changes in the prospects of particular companies and/or sectors in the economy.

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