Market Review as of 06/30/2015

The U.S. equity market (as represented by the S&P 500® Index1) advanced slightly during the second quarter of 2015, supported by a generally supportive earnings season and signs of strength in the domestic labor and housing markets. The quarter was not without some bouts of volatility, however, with questions surrounding the timing and magnitude of the Federal Reserve’s (“the Fed”) first rate hike, political headwinds related to Greek solvency, and fears of a slowing Chinese economy all contributing to investor concerns during the period. In addition, U.S. real gross domestic product (GDP) in the first quarter contracted 0.2% (according to the third estimate by the U.S. Bureau of Economic Analysis2), with declines in exports and state and local government spending among the primary detractors.  

The Fed noted that U.S. economic activity, as a whole, likely expanded around the country between early April and late May, with most districts reporting slight gains in employment and wages along with advances in consumer spending. Construction, real estate activity, and home prices also rose across most districts during the period, while manufacturing was primarily flat, with more than half of the districts reporting tempered manufacturing growth due to the downturn in the oil and gas industry.3

Elsewhere in the world, the European Central Bank’s continued quantitative easing was not enough to overcome the political risk related to Greece’s status in the eurozone, sending European markets generally lower. Chinese markets fluctuated during the quarter, as the supportive decision by the People’s Bank of China to cut its lending rate for the fourth time since November 2014 was offset by uncertainty surrounding the economy’s overall strength. Japanese equities continued to rise in the second quarter, buoyed by the continuation of aggressive monetary easing policies from the Bank of Japan, leading the U.S. dollar to reach a 13-year high relative to the Japanese yen in June.

The S&P 500 advanced 0.28% during the three-month period, but remained below new highs set earlier in the quarter. Gains occurred in five of 10 major sectors. The consumer staples, energy, industrials, materials, and utilities sectors underperformed the broader market. Value stocks (as represented by the Russell 3000® Value Index4) underperformed growth stocks (as represented by the Russell 3000® Growth Index5), while large cap stocks (as represented by the Russell 1000® Index6) trailed small cap stocks (as represented by the Russell 2000® Index7). 

Fund Review as of 06/30/2015

The Lord Abbett Fundamental Equity Fund returned  0.82%, reflecting the performance at the net asset value (NAV) of Class A shares with all distributions reinvested for the quarter ended June 30, 2015, compared to the Fund’s benchmark, the Russell 1000® Value Index,8 which returned 0.11% for the same period. Average annual total returns, which reflect performance at the maximum 5.75% sales charge applicable to Class A share investments and include the reinvestment of all distributions, as of June 30, 2015, are: one year: -1.84%; five years: 13.03%; and 10 years: 7.54%. Expense ratio: 0.95%.

Performance data quoted represent past performance, which is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The investment return and principal value of an investment in the fund will fluctuate so that shares, on any given day or when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, call Lord Abbett at 888-522-2388 or visit us at

During the period, the U.S. economy continued to show improvement, gradually returning to a more normal state, as the Fed considers an increase in the fed funds rate later in 2015. Within the U.S. equity market, our process-driven emphasis on larger-capitalization companies with more U.S.-oriented businesses benefited performance, as did the portfolio’s lower allocation to companies with more global growth exposure. Relative performance was aided by underexposure to utilities and consumer staples.

Stock selection within the financials sector contributed to relative performance during the period. Shares of JPMorgan Chase & Co., a financial holding company, steadily rose due to strong revenue growth paired with positive macro tailwinds and subsiding regulatory headwinds. Shares of Capital One Financial Corp., a diversified financial services holding company, climbed due to strong credit card and auto loan growth.

Within the consumer staples sector, shares of Mondelez International, Inc., a snack food and beverage company, increased due to strong operating metrics including organic net sales growth and operating margins despite currency headwinds.

Stock selection within the industrials sector detracted from the portfolio’s relative performance during the period. Shares of ADT Corporation, a provider of monitored security and related monitoring services, fell following the management’s announcement of accounting changes. The market reacted poorly to the changes, even though subscriber metrics were solid.  In addition, shares of Southwest Airlines Co., a passenger airline provider, reacted poorly to increased flight capacity across the airline industry. Within the materials sector, shares of International Paper Company, an international manufacturer of paper and packaging products , stumbled, despite the firm performing well during the quarter, with challenging conditions in the containerboard and boxboard industry.

Please refer to under the “Portfolio” tab for a complete list of holdings of the Fund, including the securities discussed above.


We believe the domestic equity market as a whole to be near a fairly valued level owing to an improving economic backdrop. However, a number of individual companies are still being underappreciated by consensus, allowing for compelling idea generation, and driving our belief that individual stock picking should be the primary driver of alpha in the portfolio.

We continue to focus on U.S.-centric companies that have financial and capital management flexibility to compete strategically. As a result of this view, we increased attention to stock-specific decisions, near-term fundamentals, and rigorous execution of our buy/sell discipline.

During the second quarter, we decreased the portfolio’s exposure to the health care sector, yet it remains a significant overweight relative to the benchmark. We continue to favor companies that should benefit from expanding coverage under U.S. healthcare reform as well as increased scale and global reach driven by investments and acquisitions. The portfolio continues to be underweight within the utilities and telecommunication services sectors.

Contact a Representative