Market Review as of 03/31/2016

The U.S. equity market (as represented by the S&P 500® Index1) rebounded from its worst start to any year to finish modestly higher during the first quarter of 2016. After the Federal Reserve (the Fed) raised interest rates for the first time since 2006, in December 2015, it decided to hold its benchmark interest rate unchanged during the first quarter, citing global financial market weakness as a concern. A disappointing corporate earnings season contributed to investor uncertainty during the quarter. According to research from FactSet, fourth quarter 2015 earnings suffered a slight year-over-year decline, and less than 70% of companies in the S&P 500 Index reported earnings above their mean estimates. Reasonably constructive economic data during the period helped offset some of this sluggishness. According to the third estimate from the Bureau of Economic Analysis,  U.S. real gross domestic product (GDP) in the fourth quarter expanded by 1.4%,2 an upward revision from previous estimates, with a rise in personal consumption expenditures and residential fixed investment among the primary contributors. 

The Fed noted that U.S. economic activity, as a whole, continued to expand in most districts around the country between December 2015 and February 2016. The majority of districts reported increased consumer spending and positive developments in their residential estate markets. Conversely, manufacturing activity struggled in a number of regions due in large part to further weakness in the energy sector.3

International equities4 also experienced an uneven first quarter, led by notable volatility in China’s capital markets at the beginning of the quarter. Chinese equities suffered sharp losses to start 2016, triggering trading halts, and concerning investors who were already skeptical of the market’s growth prospects. In January, the Bank of Japan introduced negative rates on excess reserves in an effort to stimulate economic growth and support Japanese markets during this tumultuous period. In Europe, markets were bolstered by the European Central Bank’s announcement in March that it would add to its existing monetary easing program.

The S&P 500 returned 1.35% during the first quarter. Of the 10 major sectors, only the health care and financials sectors underperformed the broader market. Value stocks5 outperformed growth stocks,6 while large cap stocks7 outperformed small cap stocks.8


Fund Review
as of 03/31/2016

The Lord Abbett Mid Cap Stock Fund returned 1.90%, reflecting the performance at the net asset value (NAV) of Class A shares, with all distributions reinvested for the quarter ended March 31, 2016, compared to its benchmarks, the Russell Midcap® Value Index,9 which returned 3.92%, and the S&P MidCap 400® Value Index,10 which returned  6.36%.  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 March 31, 2016, are: one year: -10.51%; five years: 6.52%; and 10 years: 4.52%. Expense ratio: 1.01%.

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

The performance of select individual positions in the financials and information technology sectors contributed to the Fund’s underperformance, relative to its benchmark, the Russell Midcap® Value Index, during the three-month period. Specifically within the financials sector, Jones Lang LaSalle, a real estate financial and professional services company, detracted from relative performance. Macro fears, concerns about decelerating global real estate market activity, and foreign exchange headwinds caused shares of Jones Lang LaSalle to decline. The Fund’s position in Fifth Third Bancorp, a regional banking company, also detracted from relative performance. Fears of a possible U.S. recession resulted in lower market expectations for the pace and magnitude of interest rate increases by the Federal Reserve in 2016. This, combined with fears of rising provisions for credit losses, particularly in energy lending, resulted in lower earnings potential for Fifth Third and banks more broadly.

Within the information technology sector, Harris Corp., an international aerospace and defense company, detracted from relative performance.  Harris shares sold off during the period, reflecting investor angst over weaker than expected revenues, potentially soft radio orders, and the unexpected departure of the company’s CFO.

Conversely, security selection in the consumer discretionary sector contributed positively to the Fund’s relative performance. Specifically within the consumer discretionary sector, Whirlpool Corp., a home appliances company, contributed to relative performance. Shares of Whirlpool advanced as management successfully demonstrated the ability to overcome recent execution challenges in the United States, while continuing to integrate recent acquisitions in Europe and Asia. The Fund’s position in PVH Corp., an apparel company, also contributed to relative performance. PVH’s share price advanced as management successfully launched revamped product lines in its core apparel brands.

Also contributing to the Fund’s relative performance was stock selection in the energy sector. The Fund’s positioning in high quality companies, with strong management teams and balance sheets, such as Patterson-UTI Energy, Inc. and EQT Corp., contributed to relative performance.  

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


We believe that the economic outlook for the United States remains muted, but favorable relative to most global economies, given the continued volatility and uncertainty around macroeconomic and geopolitical issues. We continue to closely monitor risks to the portfolio, including central bank policy decisions, commodity price volatility, and currency/interest rate volatility.

The information technology sector is the Fund’s largest overweight position, relative to its benchmark, the Russell Midcap® Value Index. The Fund is overweight communication services and IT services, while remaining underweight the software industry. The Fund also is overweight the consumer discretionary sector. The Fund is overweight hotels and leisure, housing, and housing-related business, while remaining underweight retail and media industries. The industrials sector remains one of the Fund’s largest underweight positions, due to challenged fundamentals in companies with exposure to depressed commodity end-markets. Within industrials, the Fund is overweight the aerospace and defense industry. The Fund, relative to its benchmark, is also broadly underweight the materials sector, with the exception of the containers and packaging industry. The sector continues to be affected by global overcapacity and depressed prices. 

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