How Rising Rates Could Affect the Housing Market | Lord Abbett
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Fixed-Income Insights

Lord Abbett Partner and Portfolio Manager Andy O’Brien discusses the effects rising rates could have on the housing market and the role fixed-income should play in your portfolio.

Transcript

Hi this is Andy O'Brien. I'm a partner and portfolio manager in Lord Abbett’s taxable fixed income group where I focus on investment grade corporates.

Title: Effects of Rising Rates on the Housing Market

We’ve seen a very robust housing market, partly driven by low rates, but partly driven by people wanting to make longer term lifestyle changes, live in a different place, or have more room in their home. Figuring out how much rising rates will slow that down, I think, will be key question. So a lot of knock on effects from housing. You buy a house, you tend to buy a lot of other things that are very stimulated to the economy. And so having the housing market continue to be robust, I think, will be a key part of growth remaining durable.

Our view is that the changes people want to make are going to be durable and people will not be deterred by another quarter point or half point on their mortgage. But watching that and seeing how that develops will be another thing to pay attention to in the fall and winter.

Title: The Role Fixed Income Should Play in Your Portfolio

This is a good environment in which to pay attention to the role that fixed incomes play in your portfolio. If you've got a portfolio where the fixed income is offsetting large allocation to equities, then a core bond allocation where you've got a lot of duration, a lot of things that will do well if your equities are struggling, that might be reasonable. If on the other hand, you've got an income oriented portfolio, where the fixed income is a large part of it, making sure that you're in the right parts of fixed income, things that have an orientation towards credit, will likely do well in a strong growth, rising rate environment that's something that that's going to hold up better than a classic core bond portfolio that.

We tend to struggle as rates rise so thinking about what are you doing with fixed income you're in your portfolio and is the fixed income that you have the right kind of fixed income for the role you're trying to get it to play.

OUTRO

Thank you for watching and thank you for your continued interest in Lord Abbett.

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. High-yield securities, sometimes called junk bonds, carry increased risks of price volatility, illiquidity, and the possibility of default in the timely payment of interest and principal. Bonds may also be subject to other types of risk, such as call, credit, liquidity, interest-rate, and general market risks. Longer-term debt securities are usually more sensitive to interest-rate changes; the longer the maturity of a security, the greater the effect a change in interest rates is likely to have on its price. Lower-rated bonds may be subject to greater risk than higher-rated bonds. No investing strategy can overcome all market volatility or guarantee future results.

The credit quality of the securities in a portfolio are assigned by a nationally recognized statistical rating organization (NRSRO), such as Standard & Poor’s, Moody’s, or Fitch, as an indication of an issuer’s creditworthiness. Ratings range from ‘AAA’ (highest) to ‘D’ (lowest). Bonds rated ‘BBB’ or above are considered investment grade. Credit ratings ‘BB’ and below are lower-rated securities (junk bonds). High-yielding, non-investment-grade bonds (junk bonds) involve higher risks than investment-grade bonds. Adverse conditions may affect the issuer’s ability to pay interest and principal on these securities.

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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