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DoubleLine Podcasts

S11 E10: Lord Abbett’s Steven Rocco on Investing the C’s

Steven Rocco, Co-Head of Taxable Fixed Income at Lord Abbett and Lead Portfolio Manager for the firm’s High Yield and Multi Sector fixed income strategies, discusses his positioning for a base case: in the absence of another show-stopping COVID-19 variant or other unforeseen shock, global growth and reflation. Although he tends to avoid interest-rate bets, Mr. Rocco tells co-hosts Jeffrey Sherman and Samuel Lau that he expects a steepening U.S. Treasury yield curve (11:46). The market has priced in the third quarter of 2021 as “the slowest quarter of the year,” Mr. Rocco says. “You have (the) Delta (variant) to blame for that. I think the market here is very sensitive to signs of improving growth. You saw how the market reacted on Friday (Oct. 15) when you got stronger retail sales. I think you’ll see, as hopefully Delta is dying, the case counts drop across the globe; that will unleash more spending and strong growth in Q4.”

To position for a bull market, Mr. Rocco is focused on what he calls “the C’s” with the exception of “China, the one bear market of the year” (9:19): commodities, commercial real estate, collateralized loan obligations, bank loans (which flow into CLOs), container ships and cruises. In CLOs, he likes A, AA and even AAA CLOs (38:28): “not much upside, but you do have nice carry. It depends how aggressive you want to be. Even some of the BBs now at 650 (basis points) look interesting. If you can find the right managers, I think that’s a nice area.” His bullishness on commodities has been tempered “given the run we’ve had at this point in time,” but he still looks for areas that “that benefit from trending inflation.” The podcast was recorded Oct. 18, 2021.

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