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 Mid Cap Stock Fund returned -1.27%, 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 its benchmarks, the Russell Midcap® Value Index,8 which returned -1.97%, and the S&P MidCap 400® Value Index,9 which returned -1.17%.  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: -0.80%; five years: 14.72%; and 10 years: 5.91%. 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

Security selection within the financials and health care sectors were the primary drivers behind the Fund’s relative outperformance. Commercial banks Citizens Financial Group Inc. and East West Bancorp, Inc. were both beneficiaries of better than expected earnings reports, as well as the market favoring companies that could benefit from rising interest rates. Last, an underweight position in the REIT sector contributed to the Fund’s relative outperformance.

In addition, health care holding Cigna Corp. contributed to the Fund’s performance. The health care insurance provider saw its share price rise after competitor Anthem, Inc. announced an unsolicited bid to acquire the company. As of quarter-end, this potential deal had not yet reached a conclusion.

Conversely, security selection within the materials and utilities sectors detracted from the Fund’s relative performance. In particular, shares of materials holding Axiall Corp., a manufacturer of chemical and plastic products, fell during the quarter, owing to concerns that the company’s core business is deteriorating. Another materials holding, International Paper Company, a producer and distributor of paperboard-based industrial and consumer packaging, saw its share price negatively affected by concerns surrounding the outlook for containerboard demand as well as the company’s exposure to international markets.

Within the utilities sector, Portland General Electric Co., an electric utility company, experienced a decline in retail sales volumes, driven by milder weather during the period.

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 relatively favorable among most global economies, yet we remain cautious given the continued volatility and uncertainty around macroeconomic and geopolitical issues, and somewhat elevated valuations for stocks in general. We continue to closely monitor risks to the portfolio, including central bank policy decisions, commodity price instability, and currency/interest rate volatility.

The health care sector is the portfolio’s largest overweight position relative to its benchmark, the Russell Midcap® Value Index. The industry continues to benefit from the Affordable Care Act as well as merger and acquisition activity, as companies seek to increase scale and improve productivity. The portfolio also is overweight the financials sector relative to its benchmark. The portfolio is broadly diversified across the banking, capital markets, and insurance industries, while remaining underweight REITs. The portfolio’s largest underweight, relative to its benchmark at quarter-end, is the energy sector, as market conditions remain challenged. The utilities sector remains a meaningful underweight due to concerns regarding rising interest rates, expensive valuations, and the potential ramifications of the rise of distributed generation.

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