Market Volatility: Today versus 2008 | Lord Abbett
Image alt tag

Error!

There was a problem contacting the server. Please try after sometime.

Sorry, we are unable to process your request.

Error!

We're sorry, but the Insights and Intelligence Tool is temporarily unavailable

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.

Error!

We're sorry, but the Literature Center checkout function is temporarily unavailable.

If this problem persists, or if you need immediate assistance, please contact Customer Service at 1-888-522-2388.

Tracked Funds

You have 0 funds on your mutual fund watch list.

Begin by selecting funds to create a personalized watch list.

(as of 12/05/2015)

Pending Orders

You have 0 items in your cart.

Subscribe and order forms, fact sheets, presentations, and other documents that can help advisers grow their business.

Reset Your Password

Financial Professionals*

Your password must be a minimum of characters.

Confirmation Message

Your LordAbbett.com password was successully updated. This page will be refreshed after 3 seconds.

OK

 

Fixed-Income Insights

Lord Abbett’s Steve Rocco, Partner and Director of Taxable Fixed Income, discusses how the current market compares to 2008.

Transcript

Video from Market Volatility Call

March 11, 2020

Question about the difference between now and 2008

Steve Rocco: I think the question is a difference between what's happening now and in 2008 ... so I would say 2008, the financial crisis, for many people was more, you know, esoteric, right? Clearly there was a tie in to home prices, but there was a lot of instruments that folks didn't understand how they were packaged. They'd understand where the linkages were, and how everything co-existed.

What's happening here is actually pretty clear. It's a simultaneous supply and demand shock and it's pretty obvious why it's happening due to COVID-19, spreading across across the globe. So I think kind of the major difference is when you look at ’08, you didn't know how it was going to end, when it's going to end, if it was going to end. I think this time, you'll see that there will be a response, from the fiscal side, from the monetary side. That provides a bridge to wherever the ultimate end date of this virus is.

And it will end at some point, probably in the near future. And so I think under that scenario, both the governments, the central banks, and the private sector, will be more than willing to do whatever it takes to get us to the other side. So that'll be kind of my expectation and the key difference between now and ’08.

I'd say specifically also from an asset class perspective, you remember coming into the financial crisis, you had a lot of obviously bad lending. You had a high yield market that was almost 20% triple-Cs. You had a lot of private equity activity, had a lot of leverage in the system. We do not have a lot of leverage in the system, we do not have a lot of excess in the system.

You have a high yield asset class that's much more high quality -- almost 50%, double-B. And so when you take it from the standpoint of where ultimately spreads should/would trade, in a recessionary type of market or recessionary conditions, I think a thousand may not be the proper starting point for that. I think it may be something a little bit more shallow than that. And I think the liquidity, the bridges that will be provided both from the fiscal side and from the private side will make the default experience that much more shallow, which would be a reason to think about high yield if and when we move to even higher spread levels than here.

Glossary of Terms

Spread is the percentage difference in current yields of various classes of fixed-income securities versus Treasury bonds or another benchmark bond measure. A bond spread is often expressed as a difference in percentage points or basis points (which equal one-one hundredth of a percentage point). The option-adjusted spread (OAS) is the measurement of the spread of a fixed-income security rate and the risk-free rate of return, which is adjusted to take into account an embedded option. Typically, an analyst uses the Treasury securities yield for the risk-free rate.

The credit quality of the securities 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'sability to pay interest and principle on these securities.

The views and opinions expressed are as of the date of the broadcast, are subject to change based on subsequent developments, and may not reflect the views of the firm as a whole. The material is not intended to be relied upon as a forecast, research, or investment advice, is not a recommendation or offer to buy or sell any securities or to adopt any investment strategy, and is not intended to predict or depict the performance of any investment. Readers should not ass e that investments in companies, securities, sectors, and/or markets described were or will be profitable. Investing involves risk, including possible loss of principal.

A Note about Risk: 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.

Statements concerning financial market trends are based on current market conditions, which will fluctuate. There is no guarantee that markets will perform in a similar manner under similar conditions in the future.

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.

This broadcast is the copyright © 2020 of Lord, Abbett & Co. LLC. All Rights Reserved. This recording may not be reproduced in whole or in part or any form without the permission of Lord Abbett.

ABOUT THE SPEAKER

image

Please confirm your literature shipping address

Please review the address information below and make any necessary changes.

All literature orders will be shipped to the address that you enter below. This information can be edited at any time.

Current Literature Shipping Address

* Required field