Market Review as of 09/30/2015

The U.S. equity market (as represented by the S&P 500® Index1) declined during the third quarter of 2015 amid a bout of substantial volatility in August and September. The impact of slowing Chinese growth on the global economy and ongoing uncertainty surrounding the timing and magnitude of the Federal Reserve’s (Fed) first rate hike contributed to investor concerns. On the positive side of the ledger, expanding U.S. real gross domestic product (GDP) provided support for U.S. equities during the period. GDP in the second quarter increased by 3.9% (according to the third estimate by the U.S. Bureau of Economic Analysis2), with a rise in exports and state and local government spending among the primary contributors. 

The Fed noted that U.S. economic activity, as a whole, continued to expand around the country between July and mid-August, with most districts reporting modest to moderate growth in labor demand and advancement in consumer activity. Additionally, most districts reported positive developments in their residential and commercial real estate markets. Existing home sales and residential leasing showed wide improvements, commercial construction rose in most districts, and commercial leasing increased across the board. Manufacturing activity during the period was mostly positive, although four of the 12 districts reported a mixed picture, and two cited declines.3

International equity markets also experienced notable volatility during the quarter, primarily as a result of weakness in the Chinese economy. The People’s Bank of China (PBoC) devalued the yuan following disappointing Chinese economic data, leading to increased investor concern across global markets. Commodities also experienced sharp moves during the period, with concerns once again tied to the transition in China from an export-based economy to one that relies more on domestic consumption. Ultimately, this broader uncertainty hurt global equities unilaterally.

The S&P 500 declined -6.44% during the three-month period. Of the 10 major sectors, only the utilities sector managed a positive return for the quarter. Despite posting losses, the consumer staples, consumer discretionary, financials, and information technology sectors outperformed 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) outperformed small cap stocks (as represented by the Russell 2000® Index7). 

Fund Review
as of 09/30/2015

The Lord Abbett Mid Cap Stock Fund returned -8.31%, reflecting the performance at the net asset value (NAV) of Class A shares with all distributions reinvested for the quarter ended September 30, 2015, compared to its benchmarks, the Russell Midcap® Value Index,8 which returned -8.04%, and the S&P MidCap 400® Value Index,9 which returned  -10.13%.  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 September 30, 2015, are: one year: -5.95%; five years: 10.12%; and 10 years: 4.56%. 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 health care and financials sectors contributed to the Fund’s underperformance, relative to its benchmark, the Russell Midcap® Value Index, during the three-month period. Specifically within the health care sector, Mallinckrodt PLC., a specialty pharmaceutical company, detracted from relative performance. Shares of Mallinckrodt sold off following a reduction in the near-term outlook for its specialty generic drug business. Increased uncertainty surrounding potential competition for Acthar, its drug for the treatment of autoimmune and inflammatory conditions, also impacted the company’s share price. The Fund’s position in global pharmaceutical company Mylan NV also detracted from relative performance. Shares of Mylan declined after company management successfully and inexplicably thwarted the attempted takeover of the company at a significant premium by Teva Pharmaceutical Industries Inc.

Within the financials sector, financial services company Lincoln National Corporation detracted from relative performance.   During the period, shares declined as investors became concerned that falling equity markets, as well as lower interest rates, would negatively impact Lincoln’s annuity businesses.

Conversely, security selection and an underweight to the energy sector contributed to the Fund’s relative performance. The Fund remains underweight the energy sector, due to concerns of oversupply and slowing demand for oil. The Fund’s positioning in high-quality, low-cost producers, with strong management teams and balance sheets, such as Cimarex Energy Co. and EQT Corp., contributed to relative performance.  

Also contributing to the Fund’s relative performance was stock selection in the information technology sector. NVIDIA Corp., a developer of visual computing processors, posted a better than expected quarter, driven by growing revenues in the automotive and video gaming markets.

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 favorable, relative to most global economies, yet we remain cautious, given the continued volatility and uncertainty around macroeconomic and geopolitical issues. We continue to closely monitor risks to the Fund, including central bank policy decisions, commodity price instability, and currency/interest rate volatility.

The consumer discretionary sector is the Fund’s largest overweight position, relative to its benchmark, the Russell Midcap® Value Index. The Fund is broadly diversified across the hotels and leisure, housing, and housing related industries, while remaining underweight the retail and media industries. The Fund also is overweight the financials sector, relative to its benchmark. The Fund is diversified across the banking, capital market, and insurance industries, while remaining underweight REITs. The utilities sector remains one of the Fund’s largest underweights due to concerns over rising interest rates, expensive valuations, and the potential ramifications of the rise of distributed generation. The Fund is also broadly underweight the materials sector, relative to its benchmark, with the exception of the containers and packaging industry. The sector continues to be affected by global overcapacity and falling prices. 

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