FEBRUARY 2018 OUTLOOK

Transcription

1 FEBRUARY 2018 OUTLOOK Ladenburg Thalmann FEBRUARY 2018 This presentation has been prepared exclusively for use with Ladenburg Thalmann analysts. It is not intended for, and should not be used with, any third party or the public.

2 RECENT MOVES The equity correction has been an outlier vs other asset classes Market analysts originally pointed to inflation and rising rates, but this only explains part of the move Interest rate rises have exceeded gains in inflation expectations. This suggests the market is repricing risk premium. Possible catalysts are Fed uncertainty and acceleration of expected normalization from the ECB 1 The reintroduction of risk premium to the marketplace is inevitable and positive, but could be an uncomfortable process. Successfully navigating this transition will be critical. The views and opinions provided are as of the date of publication, 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. This document is prepared based on information Lord Abbett deems reliable; however, Lord Abbett does not warrant the accuracy and completeness of the information.

3 RECENT MOVES ALL SUGGEST RISING RISK PREMIUMS 2 Source: Bloomberg. Past performance is not a reliable indicator or guarantee of future results. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.

4 2018 OUTLOOK Synchronized global growth is positive for earnings and risk assets This expansion stage of the US economic cycle is unlikely to end in 2018 Low volatility and tight spread environments are typical during economic expansions Central Bank activity has created some valuation distortions; consideration of risk premia can lead to relative value opportunities and explain many market moves 3 Risk factors include rising inflation and / or volatility, monetary policy reversals / divergences, and imbalances fueled by easy money / late cycle behaviors for both investors and borrowers Many portfolios may be overly sensitive to term risk premium and have more risk than anticipated The views and opinions provided are as of the date of publication, 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. This document is prepared based on information Lord Abbett deems reliable; however, Lord Abbett does not warrant the accuracy and completeness of the information.

5 ECONOMIC RECOVERY GDP GROWTH SINCE THE LAST PEAK (AS OF 09/30/2017) 120 U.S Euro Area Japan Index (2007 Q4=100) Dec-07 Dec-09 Dec-11 Dec-13 Dec-15 The U.S. economic recovery has been much stronger than in other developed market economies. This creates a far different backdrop for monetary policy in the U.S. Source: Bloomberg and Lord Abbett. Past performance is not a reliable indicator or guarantee of future results. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.

6 APPROACHING FULL EMPLOYMENT Strong labor demand versus a broad definition of available workers and a rising quit rate imply the U.S. labor market is tight enough to force accelerating wage increases. Job Openings as % of Available (Labor Force + Not in Labor Force But Willing to Work) Labor Voluntary and Involuntary Job Separations Layoff & Discharge Rate Quit Rate Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14 Dec Dec-00 Dec-02 Dec-04 Dec-06 Dec-08 Dec-10 Dec-12 Dec-14 Dec-16 5 The information provided is for illustrative purposes only. Data as of 08/31/2017. Source: Bloomberg and Lord Abbett.

7 WAGE COSTS IN THE CURRENT LABOR MARKET ATLANTA FED WAGE TRACKER (AS OF 10/01/2017) 7 Overall Job Switcher 6 YOY% Change (3 Month Moving Average) Mar-97 Mar-02 Mar-07 Mar-12 Mar-17 Wage costs are starting to accelerate in a very hot labor market but the pace is not rapid enough to set off a threatening wage-price spiral. Source: Federal Reserve Bank of Atlanta. The information provided is for illustrative purposes only.

8 EUROZONE CONFIDENCE EUROZONE CONFIDENCE INDICATORS (AS OF 11/30/2017) 3 2 Consumer Industrial 1 Normalized Index (z-score) Jan-95 Jan-00 Jan-05 Jan-10 Jan-15 After some very dark days and severe doubts about political stability, confidence in the Eurozone has staged a very impressive recovery. Source: Bloomberg and Lord Abbett. The information provided is for illustrative purposes only.

9 U.S. FINANCIAL CONDITIONS ARE EXTREMELY EASY CHICAGO FED NATIONAL FINANCIAL CONDITIONS INDEX (04/30/ /30/2017) Source: Federal Reserve Bank of Chicago. For illustrative purposes only.

10 GLOBAL CENTRAL BANKS CONTINUE TO ADD LIQUIDITY MONTHLY FED, ECB, BOE, AND BOJ ASSEST PURCHASES (AS OF 08/31/2017) 200 BoE Fed BoJ ECB Note: 12m moving average. Federal Reserve, European Central Bank, Bank of England and Bank of Japan. Source: DB Global Markets Research. For illustrative purposes only.

11 QE EXPECTATIONS IMPACTED THE MARKET MORE THAN PURCHASES IMPACT OF QUANTITATIVE EASING ON U.S. 10-YEAR TREASURY 4.5 January 1, 2009: QE1 Start - $600 bn 03/31/10 QE1 purchases end March 18, 2009: QE1 Expanded to $1.725 tn March 31, 2010: QE1 Ends 4.0 November 3, 2010: June 2011: QE2 Start - $600 bn QE2 Proposed End % /25/08 QE1 announced 03/18/09 QE1 expanded 08/27/10 Jackson Hole speech QE2 hinted 11/3/10 QE2 purchases begin 01/01/09 QE1 purchases begin 2.0 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Source: Bloomberg. Past performance is not a reliable indicator or guarantee of future results. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.

12 THE CREDIT CYCLE 10 years of recovery is unusually long for any credit cycle. Time of cycle is less relevant than economic recovery metrics 11 Business expansion leads to economic growth but can foster harmful speculative activity

13 CURRENT BUSINESS CYCLE IS OLD BY THE CLOCK BUT LIGHT BY THE SCALE GDP Levels During Current and Previous U.S. Business Cycles Cumulative Growth In Real GDP From Previous Peak To 38th Quarter Of Subsequent Expansion(%) Current Average of 9 Previous Post-Korean War Average of 2 Post Deregulation Index (Previous Peak = 100) T-4 0 T+4 T+8 T+12 T+16 T+20 T+24 T+28 T+32 T+36 0 Current(2007Q4-?) 1990Q3-2001Q1 1960Q2-1969Q4 Past performance is no guarantee of future results. The information provided is for illustrative purposes only and does not represent any portfolio managed by Lord Abbett. Data as of 09/01/2017. Source: U.S. Bureau of Economic Analysis and Lord Abbett.

14 CAPITAL SPENDING PRIVATE NONRESIDENTIAL FIXED INVESTMENT (EQUIPMENT AND STRUCTURES) Index (Previous Peak=100) Current Average of 9 Post-Korean War Cycles PHILLY FED SURVEY: CAPITAL SPENDING PLANS (AS OF 11/30/2017) Index (3MMA) Philly Fed ( Average) T-4 0 T+4 T+8 T+12 T+16 T+20 T+24 T+28 T+32 T Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Capital spending by businesses has also lagged badly but it has started to pick up notably in both surveys and hard data. Source: U.S. Bureau of Economic Analysis, Bloomberg, and Lord Abbett. For illustrative purposes only.

15 THE HOUSING SECTOR PRIVATE RESIDENTIAL FIXED INVESTMENT Current Average of 9 Post-Korean War Cycles U.S. HOUSING VACANCY RATES (AS OF 09/30/2017) Rental Units Owner-Occupied Units Index (Previous Peak=100) % T-4 0 T+4 T+8 T+12 T+16 T+20 T+24 T+28 T+32 T+36 0 Mar-85 Mar-90 Mar-95 Mar-00 Mar-05 Mar-10 Mar-15 The housing sector has lagged badly but low vacancy rates suggest it may be poised to contribute to an acceleration in GDP. Source: U.S. Bureau of Economic Analysis, Bloomberg, and Lord Abbett. For illustrative purposes only.

16 THE DEBT-EQUITY CLOCK REPAIR Balance sheet repair, debt repayment, focus on cash generation and survival Metals & Mining Energy Leverage Falling Gaming Lodging Restaurants RECOVERY Restructuring increases margins, FCF growing, leverage falling Low Growth The Credit Cycle High Growth 15 DOWNTURN EXPANSION Recession, attempts to delever fail given falling asset prices Retail Leverage Rising Telecomm Healthcare Media Leverage rising intentionally, speculative corporate activity

17 THE PERSONAL SAVINGS RATE HAS PLUNGED RECENTLY The 2-year drop from 6% to a recent low point has prompted concerns that the US consumer may be over-extended. 16 Source: Bloomberg Past performance is not a reliable indicator or guarantee of future results. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.

18 TOTAL AMOUNT OF PRIVATE DEBT REMAINS RELATIVELY LOW Corporate and Consumer debt burden remains well below pre-crisis levels US Private Debt To GDP Source: Bloomberg. As of For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.

19 THE HOUSEHOLD DEBT SERVICE BURDEN IS STILL HISTORICALLY LOW Consumer leverage equates roughly t levels, while the cost of debt service is quite low. Consumer lending delinquencies suggest overall consumer health. 18 Source: Bloomberg and Haver Analytics. Jan and Jan For illustrative purposes only.

20 THE YIELD CURVE The relatively flat yield curve has prompted questions over implications Yield curve shape is driven by expectations Examining curve decomposition can be quite valuable. 19 Inflation, uncertainty and global rates are all key factors. Central bank activity has directly impacted the slope. The views and opinions provided are as of the date of publication, 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. This document is prepared based on information Lord Abbett deems reliable; however, Lord Abbett does not warrant the accuracy and completeness of the information.

21 THE CURVE HAS FLATTENED, BUT NOT TO ABNORMAL LEVELS 2s/10s UST yield spread and 5s/30s UST yield spread (AS OF 01/31/2018) Year U.S. Treasury - 5 Year U.S. Treasury 10 Year U.S. Treasury - 2 Year U.S. Treasury bps Source: Bloomberg. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.

22 U.S. RATES TRACK INFLATION EXPECTATIONS PRE-CRISIS RATES VS. INFLATION (AS OF 01/31/2018) 6% USD Inflation Swap Forward 5Y5Y 10-Year U.S. Treasury Yield 5% 4% 21 3% 2% 1% 0% Source: Bloomberg. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.

23 10 YEAR REAL INTEREST RATES STILL HOVERING NEAR ZERO NOMINAL VERSUS REAL RATES (AS OF 01/31/2018) 3.5% 3.0% 10 Year Real Rate¹ 10 Year Inflation Breakeven² 2.5% 2.0% 1.5% % 0.5% QE 0.0% -0.5% -1.0% Source: Bloomberg. 1 RR10CUS Index. 2 USGGBE10 Index. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.

24 U.S. RATES TRACK EUROPEAN YIELDS 10 YEAR RATES VS. 10 YEAR BUND (AS OF 09/30/2017) 7 10 Yr U.S. Treasury Yield Currency Hedge German 10 Yr Bund Rate 10 Yr U.S. Treasury Yield % Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Source: Bloomberg. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment. Represented by Germany Generic Govt 10 Year and U.S. Generic Govt 10 Year.

25 U.S. RATES TRACK EUROPEAN YIELDS 10 YEAR RATES VERSUS 10 YEAR BUND (AS OF 01/31/2018) 7% 6% German 10 Yr Bund Rate 10 Yr U.S. Treasury Yield 10 Yr U.S. Treasury Yield Currency Hedge 5% 4% 24 3% 2% 1% 0% -1% Source: Bloomberg. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.

26 CURVE SHAPE IS DIRECTLY IMPACTED BY CENTRAL BANKS CURVES SLOPE VS. RATE VOLATILITY (AS OF 09/30/2017) 140 2s/10s Rate Vol Index Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan Source: Bloomberg. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.

27 U.S. TREASURY TERM PREMIUM IS NEGATIVE ACM TREASURY TERM PREMIUM (AS OF 01/31/2018) Year Term Premium Average Source: Federal Reserve Bank of New York. As represented by ACMTP10. Y-Axis represents ACM Treasury Term Premium For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment. Indexes are unmanaged, do not reflect the deduction of fees and expenses, and are not available for direct investment.

28 WHAT IS TERM PREMIUM? The term premium is the compensation for the uncertainty associated with holding a longterm investment, as compared with short term bonds. INVESTMENT OPTION #1: Invest in a 1 Year Bond Each Year for Two Years 2.00% 2.30% 1 Year Rate Today 1 Year Rate 1 Year from Today 27 INVESTMENT OPTION #2: Invest in a 2 Year Bond Today, Locking in Today s Two Year Rate 2.15% 2 Year Rate Today As Time to Maturity Increases Uncertainty Increases For illustrative purposes only. Compensation for Uncertainty Should Increase

29 WHAT IS TERM PREMIUM? DECOMPOSITION OF 10 YEAR TREASURY YIELDS Compensation for the possibility that actual future rates may differ from what is expected Term Premium 28 Compensation for the Expected Erosion of Pricing Power Expected Inflation Rates Over the Next 10 Years Compensation for Lending Funds Based on the Expected Path of Interest Rates Expected Fed Funds Rate over the next 10 Years For illustrative purposes only.

30 WHY IS TERM PREMIUM LOW? US Central bank activity: (Line graph - Fed bond buying vs rates) Massive bond purchases via QE and Operation Twist Non-US Central Bank Activity: (Line graph - Overseas benchmark rates vs US rates) The Bank of Japan and the European Central Bank have slashed their benchmarks to unprecedented lows making U.S. debt is relatively attractive, and thus resulting in increased global demand for US debt. 29 Uncertainty is low (uncertainty index, MOVE Index) Term premiums tend to rise in recessions and periods of great disagreement among economic forecasts Minimal investor concern about inflation (CPI swaps) Relatively low uncertainty about future course of interest rates Regulation: Requiring increased liquidity and posted collateral in derivatives transactions

31 OTHER FORMS OF RISK PREMIUM Low term risk premium reflects higher confidence, and drives other risk premiums lower also, as investors seek returns elsewhere. Volatility, equity risk premium and credit spreads all compensate investors for taking risk, but are also currently at levels below historic averages. 30 Credit risk premium may look inexpensive to term risk premium, yet investors hold more duration risk than ever.

32 ECONOMIC UNCERTAINTY IS LOW FILTERED UNCERTAINTY INDEX (AS OF 09/30/2017) Source: ReserachGate. For illustrative purposes only.

33 OTHER FORMS OF RISK PREMIUM ARE ALSO DEPRESSED VIX INDEX VERSUS BBB SPREADS (AS OF 01/31/2018) 70 7 VIX index CSI BBB Index VIX Index CSI BBB Index (%) Source: Bloomberg. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.

34 TREASURY YIELDS IMPACT P/E RATIOS. S&P 500 NTM P/E vs. 10-Year Yield Monthly data; 1975-February P/E: 16.7x 10-Year: 2.4% 33 Source: Federal Reserve, S&P, Thomson Financial, Fact Set, Haver, and RBC Capital Markets. Monthly data; 1975 to present. Past performance is no guarantee of future results. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.

35 P/E RATIOS ARE HIGHER IN LOW INFLATION ENVIRONMENTS 20x Average S&P 500 LTM P/E by CPI Y/Y Tranche (1950 February 2018) 16.8x 18.1x 17.3x S&P 500 LTM P/E 16x 12x 8x 14.7x 10.9x 9.5x 8.5x 8.0x 34 4x -2-0% 0-2% 2-4% 4-6% 6-8% 8-10% 10-12% 12-14% Inflation Tranche Source: For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.

36 DURATION RISK IN CORE BONDS BLOOMBERG BARCLAYS U.S. AGGREGATE BOND INDEX: DURATION & YIELD (AS OF 12/31/2017) Years Duration (Years) Yield to Maturity (%) % Hypothetical Returns for 6-Year Duration Fixed Income in Rising Rates Rate Increase No Change +50bps +100bps +150bps +200bps Price Return 0.00% -3.0% -6.0% -9.0% -12.0% Yield 2.72% 2.72% 2.72% 2.72% 2.72% Total Return 2.72% -0.27% -3.26% -6.25% -9.24% 0.0 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Source: Bloomberg Barclays. Duration as represented by modified adjusted duration in years. Yield as represented by yield to maturity. Yield to maturity is the rate of return anticipated on a bond if held until it matures. Duration is a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Bps represents a basis point. One basis point equals 0.01%. Performance quoted above is historical. Past Performance is not a reliable indicator or guarantee of future results. The historical data are for illustrative purposes only, do not represent the performance of any specific portfolio managed by Lord Abbett or any particular investment, and are not intended to predict or depict future results. Investors may experience different results. Due to market volatility, the market may not perform in a similar manner in the future. Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment.

37 DURATION IS UNRELIABLE AS A DIVERSIFIER 36 1 year correlation between S&P 500 and 10 Year Treasury. Source: Bloomberg. Start date Jan For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.

38 HIGH YIELD NO TEN YEAR PERIOD OF NEGATIVE RETURNS ROLLING 10-YEAR RETURNS: U.S. HIGH YIELD VERSUS U.S. EQUITY (10 YEAR-RETURNS, CALCULATED MONTHLY, SINCE INDEX INCEPTION 12/31/ /30/2017) 12% High Yield* US Equities** 10% 8% Trailing 10-Year Returns 6% 4% 2% 0% -2% 37-4% -6% Sep-07 Sep-09 Sep-11 Sep-13 Sep-15 Sep-17 Number of 10-Year Periods with Negative Returns IEC BofA Merrill Lynch U.S. High Yield Constrained Index* 0 S&P 500 Index** 24 Source: Zephyr. Trailing 10-year returns for High Yield is represented by ICE BofA Merrill Lynch U.S. High Yield Constrained Index, and US Equities is represented by S&P 500 Index. Past performance is not a reliable indicator or guarantee of future results. The historical data shown in the chart above are for illustrative purposes only and do not represent any specific portfolio managed by Lord Abbett or any particular investment. Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment.*source: ICE Data Indices, LLC. **Source: Standard & Poors.

39 HIGH YIELD CONSISTENTLY LOWER VOLATILITY ROLLING 10-YEAR VOLATILITY: U.S. HIGH YIELD VERSUS U.S. EQUITY (10 YEAR-RETURNS, CALCULATED MONTHLY, SINCE INDEX INCEPTION 12/31/ /30/2017) High Yield* US Equities** 18% 16% Standard Deviation 14% 12% 10% 38 8% 6% Sep-07 Sep-09 Sep-11 Sep-13 Sep-15 Sep-17 Trailing 20 Year Standard Deviation ICE BofA Merrill Lynch U.S. High Yield Constrained Index* 8.94 S&P 500 Index** Source: Zephyr. Trailing 10-year returns for High Yield is represented by ICE BofA Merrill Lynch U.S. High Yield Constrained Index, and US Equities is represented by S&P 500 Index. Past performance is not a reliable indicator or guarantee of future results. The historical data shown in the chart above are for illustrative purposes only and do not represent any specific portfolio managed by Lord Abbett or any particular investment. Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment.*source: ICE Data Indices, LLC. **Source: Standard & Poors.

40 HIGH YIELD HAS PROVIDED ATTRACTIVE RETURN FOR LEVEL OF RISK U.S. HIGH-YIELD VERSUS U.S. EQUITIES (01/01/ /30/2017) 10.0% 8.0% High Yield Bonds* Stocks** Return (%) 6.0% 4.0% 2.0% 89% of the return with 55% of the volatility of U.S. equities 0.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 39 Risk (Standard Deviation %) Return Standard Deviation Sharpe Ratio High Yield Bonds (CS HY Index)* 8.28% 7.65% 0.74 Stocks (S&P 500 Index)** 9.43% 14.03% 0.53 Source: Credit Suisse. *High Yield bonds are represented by the Credit Suisse High Yield Index. **Stocks are represented by the S&P 500 Index. Past performance is not a reliable indicator or guarantee of future results. Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment. It is important to note that the high-yield market may not perform in a similar manner under similar conditions in the future. The historical data shown in the chart above are for illustrative purposes only and do not represent any specific portfolio managed by Lord Abbett or any particular investment.

41 U.S. HIGH-YIELD SPREADS U.S. HIGH YIELD - ANNUAL RETURNS (%), SPREADS, AND DEFAULTS (AS OF 09/30/2017) YTD % High Yield Default Rate % High Yield Spreads 1800 U.S. Default Rates 12.0% 10.0% 8.0% 6.0% 4.0% Median = 539 bps 415 bps Spreads (basis points) % % 0.0% 0 Sep-89 Sep-93 Sep-97 Sep-01 Sep-05 Sep-09 Sep-13 Sep-17 Source: J.P. Morgan. Yield spreads represented by the J.P. Morgan U.S. High Yield Index. Past performance is not a reliable indicator or guarantee of future results. It is important to note that the high-yield market may not perform in a similar manner under similar conditions in the future. The historical data shown in the chart above are for illustrative purposes only and do not represent any specific portfolio managed by Lord Abbett or any particular investment. Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment.

42 THE HIGH YIELD INDEX HAS MOVED UP IN RATING CREDIT QUALITY BREAKDOWN OF THE U.S. HIGH YIELD MARKET ( ) 60% 50% 49% 12/31/ /31/ % 40% 38% 37% 41 30% 20% 19% 14% 10% 0% BB B CCC & Below Over the past decade, 11% of the High Yield Index has shifted from B & CCC to BB Source: BAML U.S. High Yield Index. For illustrative purposes only and does not represent any specific portfolio managed by Lord Abbett or any particular investment.

43 IMPORTANT INFORMATION The information contained herein is provided by Lord, Abbett & Co. LLC ( Lord Abbett ). Distribution of this information to any person other than the person to whom it was originally delivered and to such person s advisers is unauthorized, and any reproduction of these materials, in whole or in part, or the divulgence of any of the contents hereof, without the prior consent of Lord Abbett, is prohibited. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. Lord Abbett has no obligation to update any or all of such information. All amounts, market value information, and estimates included herein have been obtained from outside sources where indicated or represent the good faith judgment of Lord Abbett. Where such information has been obtained from outside sources, Lord Abbett cannot guarantee the accuracy or completeness of such information. These materials are not intended to be an offer or solicitation with respect to the purchase or sale of any security or other financial instrument or any investment management services. These materials do not constitute investment advice and should not be used as the basis for any investment decision. The information in this presentation is only for illustrative purposes and is intended to provide general investment education and is not intended to provide legal, tax or investment advice. It is not intended to be relied upon as a forecast or research regarding a particular investment or the markets in general, nor is it intended to predict or depict performance of any investment or serve as a recommendation or offer to buy or sell securities. ICE BofAML Index Information: Source ICE Data Indices, LLC ( ICE ), used with permission. ICE PERMITS USE OF THE ICE BofAML INDICES AND RELATED DATA ON AN "AS IS" BASIS, MAKES NO WARRANTIES REGARDING SAME, DOES NOT GUARANTEE THE SUITABILITY, QUALITY, ACCURACY, TIMELINESS, AND/OR COMPLETENESS OF THE ICE BofAML INDICES OR ANY DATA INCLUDED IN, RELATED TO, OR DERIVED THEREFROM, ASSUMES NO LIABILITY IN CONNECTION WITH THE USE OF THE FOREGOING, AND DOES NOT SPONSOR, ENDORSE, OR RECOMMEND LORD ABBETT, OR ANY OF ITS PRODUCTS OR SERVICES. 42