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Emerging-markets (EM) inflation has been top of mind for many EM investors lately—and with good reason. Overall, EM inflation has more than doubled from a record low just last year to reach 4.7% year over year as of April 2021, based on a JP Morgan GBI-EM Global Diversified Index (ex-China) weighted basket of EM countries. We believe this sharp increase in emerging-markets inflation captures several key dynamics:

  • Rising prices for a range of global commodities (e.g., gasoline, coffee, sugar, corn, wheat, lumber);
  • The lagged impact of currency-market (FX) weakness in many emerging markets;
  • A faster-than-expected rebound in economic activity in recent quarters; and
  • A COVID-induced shift in consumption from services to durable goods and food.

 

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Important Risks: Investing involves risk, including the possible loss of principal. • Foreign investments may be more volatile and less liquid than US investments and are subject to the risk of currency fluctuations and adverse political, economic and regulatory developments. • These risks may be greater, and include additional risks, for investments in emerging markets or if a fund focuses in a particular geographic region or country. • Fixed income security risks include credit, liquidity, call, duration, and interest-rate risk. • The value of inflation-protected securities (IPS) generally fluctuates with changes in real interest rates, and the market for IPS may be less developed or liquid, and more volatile, than other securities markets.

The views expressed herein are those of Wellington Management, 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 Hartford Funds or any other sub-adviser 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 Wellington Management or Hartford Funds.

 

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Insight from our sub-adviser, Wellington Management
Gillian Edgeworth
Macro Strategist
Author Headshot
Equity Portfolio Manager
Michael Henry
Fixed Income Portfolio Manager

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