3 Keys to the 2021 Second Half: U.S. Fixed Income | Lord Abbett
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Fixed-Income Insights

Lord Abbett Portfolio Manager Andy O’Brien examines factors that could influence the U.S. bond market in second half of 2021. 

Transcript

00:01:13.500

[LOWER THIRD: Andrew O’Brien, Partner & Portfolio Manager] Hi, this is Andy O’Brien, partner and portfolio manager in Lord Abbett’s taxable fixed income area. I want to talk to you about three things that we're looking at and the investment grade corporate bond market right now.

[LOWER THIRD: Key #1: Selecting sectors for the post-pandemic environment.] The first thing we're paying attention to is sectoral composition. As we transition from the pandemic period to the post-pandemic period we're trying to get rid of industries or avoid industries that don't seem likely to thrive in the post pandemic environment—things like your classic consumer staples, now that people aren't sitting at home with “mac and cheese” anymore going out and doing other things and trying to find the post-pandemic opportunities. Some of those are very obvious-really, anything in the leisure and lodging complex. Others, you have to be a little bit more careful with things like autos and homebuilding where the ramp-up in production is creating bottlenecks and pricing pressures that could impede margins. And even if the overall industry is generating a lot of sales, it might be a profit-challenged environment, just due to the price pressures.

[LOWER THIRD: Key #2: Improving high yield credit quality.] The second thing we're looking at is the credit improvement in the high yield market. So, a number of large issuers at the fell out of the investment grade index [LOWER THIRD: “Investment-grade index” refers to the ICE BofA U.S. Corporate Index] during the pandemic got downgraded to junk. We're anticipating that quite a number of them will find their way back into the investment grade market. And taking advantage of the opportunities those transition from high yield back into investment grade, I think, will be a key part of outperforming in this environment.

[LOWER THIRD: Key #3: How companies may use their cash.] And the last thing is “animal spirits” [companies’ optimism about the future]. Companies with solid balance sheets are looking at a pretty good growth environment. You always worry as a bondholder they're going to be aggressive and maybe make a debt-financed acquisitions, or maybe using some of all that cash they piled up from government support during the pandemic to buy back stock. So as a bondholder you want to make sure that that companies are being careful stewards of their credit ratings and that's something that will watch as we move forward in this in this environment.

Outro

00:03:30.450 --> 00:03:31.320

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.

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. 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.

The information provided herein is not directed at any investor or category of investors and is provided solely as general information about our products and services and to otherwise provide general investment education. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as Lord, Abbett & Co LLC (and its affiliates, “Lord Abbett”) is not undertaking to provide impartial investment advice, act as an impartial adviser, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement investor, contact your financial advisor or other non-Lord Abbett fiduciary about whether any given investment idea, strategy, product, or service described herein may be appropriate for your circumstances.

The views and opinions expressed are as of the date of publication and are subject to change based on subsequent developments, and may not reflect the views of the firm as a whole. The information discussed is only for illustrative purposes and is intended to provide general investment education and is not intended to provide legal, tax or investment advice. It is not intended to be relied upon as a forecast or research regarding a particular investment or the markets in general, nor is it intended to predict or depict performance of any investment or serve as a recommendation or offer to buy or sell securities.

Copyright © 2021 Lord, Abbett & Co. LLC. All rights reserved. Lord Abbett mutual funds are distributed by Lord Abbett Distributor LLC.

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