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The 5-Minute Forecast

4Q18: No Time for Complacency

A concise summary of the Hartford Funds Multi-Asset Team's views on the main challenges facing investors: Growth, Income, Volatility, Inflation, and Taxes.

For a quick market recap of 3Q 2018, please click here.

Growth

Our outlook for domestic equities remains constructive, as the earnings yield for the S&P 500 Index remains above the yield on the 10-year Treasury Bond.B The impact of tariffs and wage inflation are beginning to impact some companies, but on the whole, earnings remain robust, with 80% of S&P 500 companies reporting a positive earnings per share surprise in the prior quarter and 73% reporting a positive sales surprise.C That said, many management teams are tempering forward guidance given the uncertainty around trade policies.

While growth names continue to hold up, we believe investors should consider layering in value exposure or focusing on higher-quality companies as a means of diversification rather than shifting into fixed income. Large-cap companies have endured, with positive momentum driving share prices even higher in Q3. Small caps have lagged on a relative basis, but are showing signs of a resurgence and may provide some shelter from the impact of global trade wars.

Emerging-market economies face ongoing challenges, with Turkey, South Africa, and China, in particular, experiencing further setbacks in Q3. At the same time, non-BRIC countriesD such as Poland, Thailand, and Mexico have held up well and are still attractively valued. Despite negative investor sentiment, we find emerging-market equities compelling as a source of future growth potential, but prefer active management over passive exposure as downside risks remain. Similarly, international developed equity markets have been out of favor, but present an appealing entry point for those with longer-term investment horizons, though the UK remains unappealing as it continues to sort through Brexit.

Implementation Ideas »


Income

Fixed-income exposures remain an important building block for diversified portfolios, but rising rates in the US as well as negative rates in major overseas markets make it more challenging to allocate to this asset class. Given the current starting point, we view risks as elevated and the potential for future returns remain muted. As such, we advocate for exposure through diversified and actively managed fixed-income strategies rather than passive exposures tied to a debt-weighted benchmark.

For those looking for more traditional investment-grade exposure, we suggest products with neutral- or short-durationE profiles since the increase in yields associated with longer durations isn’t compelling from a risk/return perspective. In addition, we prefer higher-quality bonds. High-yield bonds have held up well this year, but there is a risk that BBB downgrades could increase the size of the high-yield market, which would negatively impact valuations and alter future supply and demand. BBB-rated bondsF make up roughly half of the investment-grade universe, up from less than a third a decade ago, and as company debt loads increase, it’s likely some will be re-rated down to high yield if the economy slows.G Within the fixed-income universe, floating-rate loans can be a good option in a rising-rate environment, and the volume for floating-rate loans was more than three times higher than for high-yield bonds through August.H

Emerging market debt (EMD) offers enticing yields in a low-yield world, but many regions are politically and economically volatile right now. Careful positioning within EMD has become increasingly important as continued dollar strength on the back of Fed tightening puts pressure on these assets. In addition, weak fundamentals and radical moves by leadership in countries such as Argentina and Turkey have led many investors to withdraw capital. As such, we support employing actively managed solutions that can quickly adapt to any changes.

REITsI may be an interesting option for investors looking to diversify their income sources. Their potential for above-average income that can keep pace with inflation makes them a worthwhile option for long-term investors.

Implementation Ideas »


Volatility

Volatility in both the equity and credit markets was muted in the third quarter before spiking early in the fourth quarter. The yield curve continued to flatten, making longer-duration US government bonds relatively unattractive as an equity market hedge. Similarly, non-US sovereign debt, which can potentially help diversify some of the domestic equity and fixed-income volatility, looks unattractive right now given the negative momentum, low yields, and additional currency risk. Instead, we suggest considering cash or shorter-duration fixed-income strategies as a low-risk way to hedge against risk of equity drawdowns and rising interest rates.

Implementation Ideas »


Inflation

The ten-year inflation break-even rate, a market-based measure of expected inflation, increased to 2.2% in Q3. In addition, CPIJ ticked up to a 2.9% year- over-year growth rate, the highest it’s been since the end of 2011. These metrics exceed the Fed’s 2% inflation target, which makes the prospect of future rate increases likely. As the trade war continues and tariffs increase, price increases are generally being passed through to consumers. Amidst this backdrop, we suggest layering inflation protection into portfolios. Treasury Inflation Protected Securities (TIPS), commodity-linked assets, and municipal real return bonds all may offer some relief, but we favor commodities the most given their positive supply-and-demand dynamics.

Implementation Ideas »


Taxes

The yield curve for Treasuries has flattened, while the municipal yield curve has steepened, resulting in wider spreads between Treasury bonds and municipal bonds with similar maturities. As a result, we prefer longer-duration municipal bonds. Investors seeking income should consider the merits of combining an allocation to shorter-duration traditional fixed income (where investors aren’t being compensated for added duration) with longer-duration municipal bonds, which may offer better value given the steepness of the yield curve.

Implementation Ideas »


3Q Market Review

Macroeconomic news dominated the headlines, as political bickering, tough trade talk, and sanctions persisted. Despite this, global equity markets continued their upward climb. The S&P 500 IndexA led the charge, continuing its stellar run 10 years after the Lehman Brothers bankruptcy kicked off the financial crisis.

The yield curve flattened and the Federal Reserve (Fed) increased the federal funds target rate another 0.25%. Apple and Amazon both exceeded a $1 trillion market cap.

Outside the US, emerging markets continue to lag developed markets. China dragged down the Emerging Markets Index in the third quarter as the dollar surged against most foreign currencies.


Past performance is not a guarantee of future results. Investors cannot directly invest in an index.

JP Morgan GBI Emerging Markets Global Diversified Index is a comprehensive global, local emerging-markets index, and consists of liquid, fixed-rate, domestic-currency government bonds.

* Views expressed are as of 9/30/18, based on available information, and subject to change without notice. This material is not intended to constitute investment advice, an offer to sell, or the solicitation of an offer to purchase shares or other securities.

A S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held stocks.
B Source: Bloomberg, 10/2/18.
C Source: FactSet Earnings Insight. Earnings per share is the portion of a company’s profit allocated to each outstanding share of common stock.
D BRIC is an abbreviation for four emerging-market countries: Brazil, Russia, India, and China.
E Duration is a measure of the sensitivity of an investment’s price to nominal interest-rate movement.
F BBB-rated bonds are the lowest-rated bonds that still quality as investment-grade quality.

G Source: Barron’s, “Where the Bond Markets Next Big Problem Could Start, 4/17/18
H Source: LeveragedLoan.com
I REIT, which stands for Real Estate Investment Trust, is a company that owns or manages income-producing real estate. REITs are dependent upon the financial condition of the underlying real estate. Risks associated with REITs include credit risk, liquidity risk, and interest-rate risk.
J Consumer Price Index (CPI) is defined by the Bureau of Labor Statistics as “a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.”

 

Investing involves risk, including the possible loss of principal. There is no guarantee a fund will achieve its stated objective. Security prices fluctuate in value depending on general market and economic conditions and the prospects of individual companies. • Foreign investments may be more volatile and less liquid than U.S. investments and are subject to the risk of currency fluctuations and adverse political and economic developments. These risks may be greater for investments in emerging markets • Fixed income security risks include credit, liquidity, call, duration, and interest-rate risk. As interest rates rise, bond prices generally fall. Investments in high-yield (“junk”) bonds involve greater risk of price volatility, illiquidity, and default than higher-rated debt securities. • Loans can be difficult to value and highly illiquid; they are also subject to nonpayment, collateral, bankruptcy, default, extension, prepayment and insolvency risks. • Municipal securities may be adversely impacted by state/local, political, economic, or market conditions. Investors may be subject to the federal Alternative Minimum Tax as well as state and local income taxes. Capital gains, if any, are taxable. • The value of inflation-protected securities (IPS) generally fluctuates with changes in real interest rates, and the market for IPSs may be less developed or liquid, and more volatile, than other securities markets. • Investments in the commodities market and the natural-resource industry may increase the fund’s liquidity risk, volatility and risk of loss if adverse developments occur. • Small- and mid-cap securities can have greater risk and volatility than large-cap securities. • The main risk of real estate related securities is that the value of the underlying real estate may decrease in value. • In certain instances, unlike other ETFs, the Hartford Schroders Tax-Aware Bond ETF, Hartford Municipal Opportunities ETF, and Hartford Short Duration ETF may effect creations and redemptions partly or wholly for cash, rather than in-kind, which may make the fund less tax-efficient and incur more fees than a more conventional ETF. The Hartford Municipal Opportunities ETF and Hartford Schroders Tax-Aware Bond ETF are actively managed and do not seek to replicate the performance of a specified index. The Hartford Short Duration ETF, the Hartford Municipal Opportunities ETF are new and have a limited operating history. • Due to its investment strategy, the Hartford Multifactor REIT ETF, the Hartford Multifactor US Equity ETF. and Hartford Multifactor Developed Markets (ex-US) ETFs may make higher capital gain distributions than other ETFs. • Diversification does not ensure a profit or protect against a loss in a declining market.

The Hartford Floating Rate Fund and Hartford Floating Rate High Income Fund should not be considered an alternative to CDs or money market funds. These Funds are for investors who are looking to complement their traditional fixed-income investments.

The views expressed herein are those of Hartford Funds, are for informational purposes only, and are subject to change based on prevailing market, economic, and other conditions. The views expressed may not reflect the opinions of the sub-advisers to our funds. They should not be construed as research or investment advice nor should they be considered an offer or solicitation to buy or sell any security. This information is current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Hartford Funds.

WP424_1018  209073  HFA000382

Hartford Growth Opportunities Fund 

Performance (%)
% (as of 10/31/2018)
Average Annual Total Returns % (as of 10/31/2018)
YTD 1YR 3YR 5YR 10YR SI
Hartford Growth Opportunities  I 7.58 8.62 11.98 13.35 14.72 10.03
BENCHMARK 6.19 10.20 13.45 13.06 15.33 ---
Morningstar Large Growth Category 5.23 8.58 11.17 10.91 13.18 ---
Performance (%)
% (as of 9/30/2018)
Average Annual Total Returns % (as of 9/30/2018)
YTD 1YR 3YR 5YR 10YR SI
Hartford Growth Opportunities  I 22.44 28.81 19.62 16.64 13.46 10.95
BENCHMARK 16.99 25.89 20.36 16.23 14.18 ---
Morningstar Large Growth Category 15.65 23.06 17.65 13.92 12.07 ---
SI = Since Inception. Fund Inception: 03/31/1963
Operating Expenses:   Net 0.88% |  Gross  0.88%

Share Class Inception: 8/31/06.

Class I-share performance prior to its inception date reflects Class A-share performance (excluding sales charges) and operating expenses. SI performance is calculated from 2/19/02.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.


Hartford Multifactor US Equity ETF 


Hartford Schroders International Multi-Cap Value Fund 


Hartford Equity Income Fund 


Hartford Schroders US Small Cap Opportunities Fund 


Hartford Schroders Emerging Markets Equity Fund 


Hartford Emerging Markets Equity Fund 

The preceding list includes both mutual funds and ETFs. Unlike traditional open-ended mutual funds, ETF shares are bought and sold in the secondary market through a stockbroker. Brokerage commissions may apply. ETFs trade on the major stock exchanges and their prices will fluctuate throughout the day. When buying or selling an ETF, you’ll pay or receive the current market price, which may be more or less than net asset value. Mutual fund investors buy and sell directly with the mutual fund and mutual fund shares are priced once a day after the markets close. Both mutual funds and ETFs are subject to risk and volatility.

Hartford Balanced Income Fund 

Morningstar Analyst Rating1

Performance (%)
% (as of 10/31/2018)
Average Annual Total Returns % (as of 10/31/2018)
YTD 1YR 3YR 5YR 10YR SI
Hartford Balanced Income  I -3.17 -0.89 5.90 5.82 9.72 6.86
BENCHMARK -2.56 -0.24 5.67 5.70 9.45 ---
Morningstar Allocation--30% to 50% Equity Category -2.56 -1.10 3.79 3.16 6.14 ---
Performance (%)
% (as of 9/30/2018)
Average Annual Total Returns % (as of 9/30/2018)
YTD 1YR 3YR 5YR 10YR SI
Hartford Balanced Income  I -0.03 3.38 8.63 7.06 8.96 7.19
BENCHMARK 0.63 3.57 8.19 6.99 8.37 ---
Morningstar Allocation--30% to 50% Equity Category 1.09 3.24 6.07 4.32 5.48 ---
SI = Since Inception. Fund Inception: 07/31/2006
Operating Expenses:   Net 0.69% |  Gross  0.69%

Share Class Inception: 2/26/10.
Class I-share performance prior to its inception date reflects Class A-share performance (excluding sales charges) and operating expenses. SI performance is calculated from 7/31/06.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

1 Morningstar awarded the Fund a Silver analyst rating on 11/8/17. The Morningstar Analyst Rating is not a credit or risk rating. It is a subjective evaluation performed by the manager research analysts of Morningstar. Morningstar evaluates funds based on five key pillars, which are process, performance, people, parent, and price. Analysts use this five pillar evaluation to determine how they believe funds are likely to perform over the long term on a risk-adjusted basis. They consider quantitative and qualitative factors in their research, and the weighting of each pillar may vary. The Analyst Rating scale is Gold, Silver, Bronze, Neutral, Negative. A Morningstar Analyst Rating of Gold, Silver, or Bronze reflects an Analyst’s conviction in a fund’s prospects for outperformance. Analyst Ratings are continuously monitored and reevaluated at least every 14 months. The Morningstar Analyst Rating should not be used as the sole basis in evaluating a mutual fund. Morningstar Analyst Ratings involve unknown risks and uncertainties which may cause Morningstar’s expectations not to occur or to differ significantly from what we expected. For more detailed information about Morningstar’s Analyst rating, including its methodology, please go to hartfordfunds.com/MorningstarAnalystMethodology.


Hartford Floating Rate High Income Fund 


Hartford Schroders Emerging Markets Multi-Sector Bond Fund 


Hartford Multifactor REIT ETF 

The preceding list includes both mutual funds and ETFs. Unlike traditional open-ended mutual funds, ETF shares are bought and sold in the secondary market through a stockbroker. Brokerage commissions may apply. ETFs trade on the major stock exchanges and their prices will fluctuate throughout the day. When buying or selling an ETF, you’ll pay or receive the current market price, which may be more or less than net asset value. Mutual fund investors buy and sell directly with the mutual fund and mutual fund shares are priced once a day after the markets close. Both mutual funds and ETFs are subject to risk and volatility.

Hartford Floating Rate Fund 

Morningstar Analyst Rating1

Performance (%)
% (as of 10/31/2018)
Average Annual Total Returns % (as of 10/31/2018)
YTD 1YR 3YR 5YR 10YR SI
Hartford Floating Rate  I 3.26 3.70 5.43 3.57 6.97 4.16
BENCHMARK 4.00 4.54 5.37 3.97 7.66 ---
Morningstar Bank Loan Category 3.01 3.42 4.42 3.13 6.45 ---
Performance (%)
% (as of 9/30/2018)
Average Annual Total Returns % (as of 9/30/2018)
YTD 1YR 3YR 5YR 10YR SI
Hartford Floating Rate  I 3.56 4.70 5.55 3.81 5.25 4.21
BENCHMARK 4.00 5.16 5.31 4.13 6.14 ---
Morningstar Bank Loan Category 3.18 4.17 4.51 3.34 4.83 ---
SI = Since Inception. Fund Inception: 04/29/2005
Operating Expenses:   Net 0.73% |  Gross  0.73%

Share Class Inception: 8/31/06.
Class I-share performance prior to its inception date reflects Class A-share performance (excluding sales charges) and operating expenses. SI performance is calculated from 4/29/05.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

1 Morningstar awarded the Fund a Neutral analyst rating on 9/5/17. The Morningstar Analyst Rating is not a credit or risk rating. It is a subjective evaluation performed by the manager research analysts of Morningstar. Morningstar evaluates funds based on five key pillars, which are process, performance, people, parent, and price. Analysts use this five pillar evaluation to determine how they believe funds are likely to perform over the long term on a risk-adjusted basis. They consider quantitative and qualitative factors in their research, and the weighting of each pillar may vary. The Analyst Rating scale is Gold, Silver, Bronze, Neutral, Negative. A Morningstar Analyst Rating of Gold, Silver, or Bronze reflects an Analyst’s conviction in a fund’s prospects for outperformance. Analyst Ratings are continuously monitored and reevaluated at least every 14 months. The Morningstar Analyst Rating should not be used as the sole basis in evaluating a mutual fund. Morningstar Analyst Ratings involve unknown risks and uncertainties which may cause Morningstar’s expectations not to occur or to differ significantly from what we expected. For more detailed information about Morningstar’s Analyst rating, including its methodology, please go to hartfordfunds.com/MorningstarAnalystMethodology.


Hartford Short Duration Fund 


Hartford Short Duration ETF 


Hartford Equity Income Fund 

The preceding list includes both mutual funds and ETFs. Unlike traditional open-ended mutual funds, ETF shares are bought and sold in the secondary market through a stockbroker. Brokerage commissions may apply. ETFs trade on the major stock exchanges and their prices will fluctuate throughout the day. When buying or selling an ETF, you’ll pay or receive the current market price, which may be more or less than net asset value. Mutual fund investors buy and sell directly with the mutual fund and mutual fund shares are priced once a day after the markets close. Both mutual funds and ETFs are subject to risk and volatility.

Hartford Inflation Plus Fund 

Performance (%)
% (as of 10/31/2018)
Average Annual Total Returns % (as of 10/31/2018)
YTD 1YR 3YR 5YR 10YR SI
Hartford Inflation Plus  I -1.22 -0.99 1.43 0.45 3.73 3.76
BENCHMARK -0.98 -0.61 1.38 0.69 3.29 ---
Morningstar Inflation-Protected Bond Category -2.11 -1.23 1.34 0.46 3.42 ---
Performance (%)
% (as of 9/30/2018)
Average Annual Total Returns % (as of 9/30/2018)
YTD 1YR 3YR 5YR 10YR SI
Hartford Inflation Plus  I -0.28 0.04 1.85 0.74 2.95 3.84
BENCHMARK -0.20 0.33 1.65 0.94 2.52 ---
Morningstar Inflation-Protected Bond Category -0.71 0.42 1.98 0.83 2.63 ---
SI = Since Inception. Fund Inception: 10/31/2002
Operating Expenses:   Net 0.61% |  Gross  0.69%

Share Class Inception: 8/31/06.
Class I-share performance prior to its inception date reflects Class A-share performance (excluding sales charges) and operating expenses. SI performance is calculated from 10/31/02.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.


Hartford Global Real Asset Fund 

Hartford Schroders Tax-Aware Bond Fund 

Morningstar Analyst Rating1

Performance (%)
% (as of 10/31/2018)
Average Annual Total Returns % (as of 10/31/2018)
YTD 1YR 3YR 5YR 10YR SI
Hartford Schroders Tax-Aware Bond  I -2.01 -1.59 1.91 4.21 --- 4.32
BENCHMARK -1.01 -0.51 1.90 3.25 --- ---
Morningstar Muni National Intermediate Category -1.10 -0.79 1.33 2.24 --- ---
Performance (%)
% (as of 9/30/2018)
Average Annual Total Returns % (as of 9/30/2018)
YTD 1YR 3YR 5YR 10YR SI
Hartford Schroders Tax-Aware Bond  I -1.12 -0.36 2.43 4.66 --- 4.50
BENCHMARK -0.40 0.35 2.24 3.54 --- ---
Morningstar Muni National Intermediate Category -0.46 -0.06 1.69 2.52 --- ---
SI = Since Inception. Fund Inception: 10/03/2011
Operating Expenses:   Net 0.47% |  Gross  0.59%

Performance prior to 10/24/16 for Class I-shares reflects the performance, fees, and expenses of the Investor Class of the predecessor fund Schroder Broad Tax-Aware Value Bond Fund. If Class I fees and expenses were reflected, performance would have differed. SI performance is calculated from 10/03/11.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

1 Morningstar awarded the Fund a Neutral analyst rating on 12/8/17. The Morningstar Analyst Rating is not a credit or risk rating. It is a subjective evaluation performed by the manager research analysts of Morningstar. Morningstar evaluates funds based on five key pillars, which are process, performance, people, parent, and price. Analysts use this five pillar evaluation to determine how they believe funds are likely to perform over the long term on a risk-adjusted basis. They consider quantitative and qualitative factors in their research, and the weighting of each pillar may vary. The Analyst Rating scale is Gold, Silver, Bronze, Neutral, Negative. A Morningstar Analyst Rating of Gold, Silver, or Bronze reflects an Analyst’s conviction in a fund’s prospects for outperformance. Analyst Ratings are continuously monitored and reevaluated at least every 14 months. The Morningstar Analyst Rating should not be used as the sole basis in evaluating a mutual fund. Morningstar Analyst Ratings involve unknown risks and uncertainties which may cause Morningstar’s expectations not to occur or to differ significantly from what we expected. For more detailed information about Morningstar’s Analyst rating, including its methodology, please go to hartfordfunds.com/MorningstarAnalystMethodology.


Hartford Schroders Tax-Aware Bond ETF 


Hartford Municipal Income Fund 


Hartford Municipal Opportunities Fund 


Hartford Municipal Opportunities ETF 

The preceding list includes both mutual funds and ETFs. Unlike traditional open-ended mutual funds, ETF shares are bought and sold in the secondary market through a stockbroker. Brokerage commissions may apply. ETFs trade on the major stock exchanges and their prices will fluctuate throughout the day. When buying or selling an ETF, you’ll pay or receive the current market price, which may be more or less than net asset value. Mutual fund investors buy and sell directly with the mutual fund and mutual fund shares are priced once a day after the markets close. Both mutual funds and ETFs are subject to risk and volatility.