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Fixed-Income Insights

Assessing risk assets amid differing global growth rates

Transcript

Lord Abbett's Investment Perspectives

Bonds: The Emergence of Divergence

Kewjin Yuoh

Partner & Portfolio Manager

Kewjin Yuoh: This is Kewjin Yuoh. I'm a portfolio manager for taxable fixed income.

Assessing risk assets amid differing global growth rates

Yuoh: The U.S. in this very strong environment with the consumer, all leading indicators continuing to trend upward. And then you make the segue to trade policy and its potential impact in terms of global growth, right? The EM weakness that we've seen, the China uncertainty going forward, whatever that may be.

And so again as investors when we look at risk assets, how will risk assets perform or how can they perform in an environment where you have divergent paths fundamentally for the U.S. and the world, right? And can valuations do better from here in that environment, right? I think that's a question that we have to answer to position our portfolios correctly.

If you look at current valuations, it's already reflected some of that. High-yield debt is doing well. Investment grade corporates have weakened over the last few months, and that shift has been pretty dramatic. If you look at commercial mortgage-backed securities and asset-backed securities, commercial mortgage-backed securities focused on domestic real estate, asset-backed securities focused on the consumer. They've done very well this year, right? And so paying attention to that and thinking about the scenarios where how those relationships will change over the next six months to a year will be very important.

EM refers to emerging markets.

No investing strategy can overcome all market volatility or guarantee future results. Statements concerning financial market trends are based on current market conditions, which will fluctuate. All investments carry a certain degree of risk, including the possible loss of principal, and there are specific risks that apply to each investment strategy.

IMPORTANT INFORMATION

The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. Lord Abbett has no obligation to update any or all of such information. All amounts, market value information, and estimates included herein have been obtained from outside sources where indicated or represent the good faith judgment of Lord Abbett. Where such information has been obtained from outside sources, Lord Abbett cannot guarantee the accuracy or completeness of such information.

References to specific securities and issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities. The securities referenced may or may not be held in portfolios managed by Lord Abbett and, if such securities are held, no representation is being made that such securities will continue to be held.

Risks to Consider: The value of investments in fixed-income securities will change as interest rates fluctuate and in response to market movements. Generally, when interest rates rise, the prices of debt securities fall, and when interest rates fall, prices generally rise. Fixed-income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Investments in high yield, lower-rated debt securities, sometimes called junk bonds, and may involve greater risks than higher-rated debt securities. Lower-rated securities are subject to greater credit risk, default risk, and liquidity risk. Credit risk is the risk that debt issuers will become unable to make timely interest payments, and at worst will fail to repay the principal amount. Investments in foreign or emerging market securities may be adversely affected by economic, political, or regulatory factors and are subject to currency volatility and greater liquidity risk.

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