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Helping investors make smarter investment decisions

The Informed Investor

1Q21: Helping investors make smarter investment decisions



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Asset Class and Index Definitions

ABS are represented by the Bloomberg Barclays US Aggregate ABS Index, which is a component of the Bloomberg Barclays US Aggregate Index and has three subsectors: credit and charge cards, autos, and utilities.
Bank Loans are represented by the S&P Leveraged Loan Index, a market-value-weighted index that is designed to measure the performance of the US leverage-loan market based upon market weightings, spreads and interest payments.
Bloomberg Barclays US Aggregate Bond Index is composed of securities from the Bloomberg Barclays Government/Credit Bond Index, Mortgage-Backed Securities Index, Asset-Backed Securities Index, and Commercial Mortgage-Backed Securities Index.
Cash is represented by the Bloomberg Barclays US Treasury Bill 1-3 Month Index, which is designed to measure the performance of public obligations of the US Treasury that have a remaining maturity of greater than or equal to 1 month and less than 3 months.
EM Debt is represented by the Bloomberg Barclays Emerging Markets Aggregate Bond Index, a hard currency Emerging Markets debt benchmark that includes USD-denominated debt from sovereign, quasi-sovereign, and corporate EM issuers.
Global Government are represented by the Bloomberg Barclays Global Aggregate Bond Index, a multi-currency benchmark that includes Treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.
High-Yields Bonds are represented by the Bloomberg Barclays Global High Yield Index, a multi-currency measure of the global high yield debt market.
Investment-Grade Corporate are represented by the Bloomberg Barclays US Corporate Index, which measures the investment grade, fixed-rate, taxable corporate bond market.
MBS are represented by the Bloomberg Barclays US MBS Index, which tracks fixed-rate agency mortgage backed passthrough securities guaranteed by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC).
MSCI ACWI Index is a free float-adjusted market capitalization index that measures equity market performance in the global developed and emerging markets, consisting of developed and emerging market country indices.
MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
MSCI World ex USA Index is a free float-adjusted market capitalization index that captures large and mid cap representation across developed markets countries—excluding the United States.
Municipals are represented by the Bloomberg Barclays Municipal Bond Index, an unmanaged index that is considered representative of the broad market for investment grade, tax-exempt bonds with a maturity of at least one year.
Russell 1000 Growth Index measures the performance of the large-cap growth segment of the US equity universe.
Russell 1000 Value Index measures the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values.
S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
US Treasuries are represented by the Bloomberg Barclays US 7-10 Year Treasury Bond Index, which measures the performance of the US Government bond market and includes public obligations of the US Treasury with a maturity of between seven and up to (but not including) 10 years.

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, event 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. • 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. • Bank loans can be difficult to value and less liquid than other types of debt instruments; they are also subject to nonpayment, collateral, bankruptcy, default, extension, prepayment, and insolvency risks. • US Treasury securities are backed by the full faith and credit of the US government as to the timely payment of principal and interest. • Commodities may be more volatile than investments in traditional securities.


Additional Information About Index Providers: Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). BARCLAYS® is a trademark and service mark of Barclays Bank Plc (collectively with its affiliates, “Barclays”), used under license. Bloomberg or Bloomberg’s licensors, including Barclays, own all proprietary rights in the Bloomberg Barclays Indices. Neither Bloomberg nor Barclays approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent.

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Key lessons from successful investors throughout history:

Your behavior matters more than the market’s behavior

Patience is an undervalued investment virtue

Historical perspective can help you stay calm when others are panicking

Discussing your ideas and concerns with a financial professional can help sharpen your thinking and potentially help you avoid costly mistakes

Outlook


Asset Allocation Views

Equities

View

Comments

US

Extraordinary fiscal and monetary support coupled with vaccines could provide a tailwind

International Developed Markets

Japanese and European equities are very sensitive to an improving global cycle and appear to be attractively valued

Emerging Markets (EM)

EM equities are most sensitive to an improving global cycle and China's recovery is shifting from the manufacturing to the services part of the economy

Bonds

View

Comments

US Government

Debt concerns could weigh on the long end of the yield curve and push 10-year yields to the 2-3% range in the next 6-12 months

Investment Grade

Credit spreads are at the expensive end of their historical range

Commodities

View

Comments

Commodities

Growing demand as economies reopen and low inventories could help boost commodities

Bullish Moderately Bullish Neutral Moderately Bearish Bearish Bullish

Spreads are the difference in yields between two fixed-income securities with the same maturity, but originating from different investment sectors.
The views expressed are those of Nanette Abuhoff Jacobson, Managing Director and Multi-Asset Strategist at Wellington Management Company LLP and Global Investment Strategist for Hartford Funds. Views expressed have a 6−12 month horizon, are as of March 2021, are based on available information, and are subject to change without notice. This material is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase shares or other securities.

Outlook


Economic Snapshot

Unemployment Rate: 6.0%

Inflation Rate: 2.6%

10-Year Treasury Yield: 1.74%

Average 12-Month CD Rate: 0.33%

Brent Crude Oil Price: $63.52 per barrel

As of 3/31/21. Data Sources: FactSet; Inflation–US Department of Labor via FactSet; Average 12-Month CD Rate–Bloomberg, 3/21.

Outlook


US GDP Is Projected to Be the Highest Since 1984

Annual Real GDP Growth Rates (%)

As of 4/30/21. Source: imf.org, 5/21. 1Q21 GDP was 6.4%. Full year GDP for 2021 is also projected to be 6.4%.

Outlook


S&P 500 Index Earnings Are Projected to Set a New Record

S&P 500 Index Earnings ($) and Price-to-Earnings (P/E) Ratio

As of 3/31/21. Indices are unmanaged and not available for direct investment. P/E ratio is the ratio of the S&P 500 Index’s price divided by earnings per share. Source: FactSet, 4/21.

Historical Perspective


Inflation Makes the Search for Yield Even More Complicated

Nominal and Real 10-Year Treasury Yields (%)

Past performance does not guarantee future results. As of 12/31/20. Nominal yield, also known as the coupon yield, is a bond’s yield as a fixed percentage of its par value. Real yield is the nominal yield of a bond minus the inflation rate. For illustrative purposes only. Source: FactSet, 2/21.

Historical Perspective


Investors Need to Carefully Balance Income Potential With Risk and Diversification

Fixed Income vs. Equity Correlation Chart (2005–2020)

Past performance does not guarantee future results. As of 12/31/20. Asset classes are represented by: Cash: Bloomberg Barclays US Treasury Bill 1-3 Month Index; US Treasuries: Bloomberg Barclays US 7-10 Year Treasury Bond Index; MBS: Bloomberg Barclays US MBS Index; ABS: Bloomberg Barclays US Aggregate ABS Index; Global Government: Bloomberg Barclays Global Aggregate Bond Index; Municipals: Bloomberg Barclays Municipal Bond Index; Investment-Grade Corporate: Bloomberg Barclays US Corporate Index; EM Debt: Bloomberg Barclays Emerging Markets Aggregate Bond Index; Bank Loans: S&P Leveraged Loan Index; High Yields Bonds: Barclays Global High Yield Index. Yield is yield to maturity (i.e., the expected total return if a bond is held until maturity) for all indices except Municipals, which is Yield to Worst (i.e., the lowest possible yield on a bond without it defaulting). For illustrative purposes only. Please see representative index definitions below. Diversification does not ensure a profit or protect against a loss in a declining market. Data Sources: Bloomberg, S&P Dow Jones, and Morningstar, 2/21.

Historical Perspective


US Investors Are Significantly Underweight International Stocks

MSCI ACWI Index vs. Average US Investor

As of 3/31/21. Please see representative index definitions below. Data Sources: FactSet and Morningstar.

Historical Perspective


The US Isn’t Always Best

Percentage of World’s Top-50 Stocks That Are Non-US

Past performance does not guarantee future results. As of 12/31/20. Based on the annual calendar-year returns of 50 highest-performing stocks of the MSCI ACWI Index. For illustrative purposes only. Source: FactSet, 3/21.

Historical Perspective


Intra-Year Dips in US Stocks Happen Frequently

S&P 500 Index Returns (%) and Maximum Drawdowns (%)

Past performance does not guarantee future results. As of 12/31/20. Assumes reinvestment of capital gains and dividends and no taxes. Drawdown refers to the largest market drop from peak to trough during the calendar year. Data Sources: Morningstar and Hartford Funds, 2/21.

Historical Perspective


Intra-Year Dips in International Developed Markets Stocks Happen Frequently

MSCI World ex USA Index Returns (%) and Maximum Drawdowns (%)

Past performance does not guarantee future results. As of 12/31/20. Assumes reinvestment of capital gains and dividends and no taxes. Drawdown refers to the largest market drop from peak to trough during the calendar year. Data Sources: Morningstar and Hartford Funds, 2/21.

Historical Perspective


Intra-Year Dips in Emerging Market Stocks Happen Frequently

MSCI Emerging Markets Index Returns (%) and Maximum Drawdowns (%)

Past performance does not guarantee future results. As of 12/31/20. Assumes reinvestment of capital gains and dividends and no taxes. Drawdown refers to the largest market drop from peak to trough during the calendar year. Please see representative index definitions below. Data Sources: Morningstar and Hartford Funds, 4/21.

Historical Perspective


US and International Stocks Have Traded Periods of Outperformance

US Equity vs. International Equity 5-Year Monthly Rolling Returns (%)

Past performance does not guarantee future results. As of 3/31/21. The chart shows the S&P 500 Index’s returns minus the MSCI World ex USA Index’s returns. When the line is above 0, domestic stocks outperformed international stocks. When the line is below 0, international stocks outperformed domestic stocks. The performance shown above is index performance and is not representative of any Hartford Fund’s performance. Indices are unmanaged and not available for direct investment. US equity is represented by the S&P 500 Index. International equity is represented by the MSCI World ex USA Index. For illustrative purposes only. Please see representative index definitions below. Data Sources: Morningstar, Bloomberg, and Hartford Funds, 4/21.

Historical Perspective


Growth and Value Stocks Have Traded Periods of Outperformance

Russell 1000 Growth Index vs. Russell 1000 Value Index 5-Year Monthly Rolling Returns (%)

Past performance does not guarantee future results. As of 3/31/21. The chart shows the values of the Russell 1000 Growth Index returns minus the Russell 1000 Value Index returns. When the line is above 0, growth stocks outperformed value stocks. When the line is below 0, value stocks outperformed growth stocks. The performance shown above is index performance and is not representative of any Hartford Fund’s performance. Growth stocks are represented by the Russell 1000 Growth Index. Value stocks are represented by the Russell 1000 Value Index. Please see representative index definitions below. For illustrative purposes only. Data Source: Morningstar and Hartford Funds, 4/21.

Historical Perspective


Top 10 Stock Market Drops & Recoveries

10 Worst Single-Day Percentage Declines for US Stocks (1980–2020)

  Annualized (%)
Date Cause One-Day
Return (%)
# Days To Reach Previous High Return After
1 Year
Return After
3 Year
Return After
5 Year
1. October 19, 1987 Black Monday -20.47 264 23.19 11.59 13.03
2. March 16, 2020 COVID-19 Pandemic -11.98 19 66.07 ? ?
3. March 12, 2020 COVID-19 Pandemic -9.51 20 58.96 ? ?
4. October 15, 2008 Global Financial Crisis -9.03 15 20.79 10.50 13.34
5. December 1, 2008 Global Financial Crisis -8.93 6 35.85 15.11 17.22
6. September 29, 2008 Global Financial Crisis -8.79 410 -4.14 1.60 8.87
7. October 26, 1987 Black Monday 2.0 -8.28 5 23.59 10.20 12.92
8. October 9, 2008 Global Financial Crisis -7.62 3 23.59 10.20 12.92
9. March 9, 2020 COVID-19 Pandemic -7.60 57 41.10 ? ?
10. October 27, 1997 Asian Financial Crisis -6.87 8 21.48 16.30 0.47

Past performance does not guarantee future results. As of 12/31/20. Data shown is for the S&P 500 Price Index as of 3/31/21 and does not include the reinvestment of dividend payments. Data Sources: Morningstar, Ned Davis Research, and Hartford Funds, 2/21.

Historical Perspective


Missing the Market’s Best Days Has Been Costly

S&P 500 Index Growth of $10,000 (1991–2020)

Past performance does not guarantee future results. As of 12/31/20. Indices are unmanaged and not available for direct investment. For illustrative purposes only. Data Sources: Ned Davis Research, Morningstar, and Hartford Funds, 2/21.

Historical Perspective


Bear Markets Are a Normal Part of Investing

S&P 500 Index Declines of 20% or More (1929–2020)

Start and End Date % Price Decline Length in Days
9/7/29 - 11/13/29 -44.67 67
4/10/30 - 12/16/30 -44.29 250
2/24/31 - 6/2/31 -32.86 98
6/27/31 - 10/5/31 -43.10 100
11/9/31 - 6/1/32 -61.81 205
9/7/32 - 2/27/33 -40.60 173
7/18/33 - 10/21/33 -29.75 95
2/6/34 - 3/14/35 -31.81 401
3/6/37 - 3/31/38 -54.50 390
11/9/38 - 4/8/39 -26.18 150
10/25/39 - 6/10/40 -31.95 229
11/9/40 - 4/28/42 -34.47 535
5/29/46 - 5/17/47 -28.78 353
6/15/48 - 6/13/49 -20.57 363
Start and End Date % Price Decline Length in Days
8/2/56 - 10/22/57 -21.63 446
12/12/61 - 6/26/62 -27.97 196
2/9/66 - 10/7/66 -22.18 240
11/29/68 - 5/26/70 -36.06 543
1/11/73 - 10/3/74 -48.20 630
11/28/80 - 8/12/82 -27.11 622
8/25/87 - 12/4/87 -33.51 101
3/24/00 - 9/21/01 -36.77 546
1/4/02 - 10/9/02 -33.75 278
10/9/07 - 11/20/08 -51.93 408
1/6/09 - 3/9/09 -27.62 62
2/19/20 - 3/23/20 -33.92 33
Average -35.62 298

Past performance does not guarantee future results. As of 12/31/20. Source: Ned Davis Research, 2/21.

Historical Perspective


Dividend-Paying Stocks Have Significantly Outperformed Dividend Non-Payers in the Long Run

S&P 500 Index Returns by Dividend Policy: Growth of $100

Past performance does not guarantee future results. Chart data is for 1/31/73–12/31/20. Indices are unmanaged and not available for direct investment. For illustrative purposes only. The graph is not representative of any Hartford Fund’s performance, and does not take into account fees and charges associated with actual investments. Dividend Growers & Initiators – Grew or initiated a dividend in the past 12 months; Dividend Payers – Paid a dividend in the past 12 months; No Change – Maintained their dividend level in the past 12 months; Dividend Non-Payers – Did not pay a dividend in the past 12 months; Dividend Cutters & Eliminators – Lowered or eliminated their dividends in the past 12 months. Sources: Ned Davis Research and Hartford Funds, 2/21.

Historical Perspective


A Balanced Portfolio Can Help Balance Out Volatility

Cumulative Returns for Stocks, Bonds, and a Balanced Portfolio (2000–2020)

Years Stocks Bonds Balanced Investor Mindset
2000-2002 -37.6% 33.5% -6.4% "Why do I own stocks?"
2003-2007 82.9% 24.2% 51.8% "Why do I own bonds?"
2008 -37.0% 5.2% -15.9% "Why do I own stocks?"
2009-2017 258.8% 40.7% 129.8% "Why do I own bonds?"
2018 -4.4% 0.0% -2.2% "Why do I own stocks?"
2019-2020 55.7% 16.9% 35.7% "Why do I own bonds?"
Total return 1/1/2000 - 12/31/2020 283.9% 186.9% 264.7%  
Growth of $100k $383,860 $286,899 $364,666  

Past performance does not guarantee future results. As of 12/31/20. Stocks are represented by S&P 500 Index. Bonds are represented by the Bloomberg Barclays US Aggregate Bond Index. Balanced Portfolio is represented by 60% S&P 500 Index and 40% Bloomberg Barclays US Aggregate Bond Index. For illustrative purposes only. Please see representative index definitions below. Source: Morningstar and Hartford Funds, 2/21.

Investor Behavior


Buying and Selling at the Wrong Times Could Be Costly

20-year Annualized Returns by Asset Class (%) (1991–2020)

As of 12/31/20. Performance data for indices represents a lump sum investment in 1/1/91–12/31/20 with no withdrawals. US Equities are represented by the S&P 500 Index. US Bonds are represented by the Bloomberg Barclays US Aggregate Bond Index. Index performance is not indicative of any Hartford fund.
Average Equity Investor and Average Bond Investor performance results are calculated using data supplied by the Investment Company Institute. Investor returns are represented by the change in total mutual fund assets after excluding sales, redemptions, and exchanges. This method of calculation captures realized and unrealized capital gains, dividends, interest, trading costs, sales charges, fees, expenses, and any other costs. After calculating investor returns in dollar terms, two percentages are calculated for the period examined: Total investor return rate and annualized investor return rate. Total investor return rate is determined by calculating the investor return dollars as a percentage of the net of the sales, redemptions, and exchanges for each period.
Dalbar’s Quantitative Analysis of Investor Behavior Methodology – Dalbar’s Quantitative Analysis of Investor Behavior uses data from the Investment Company Institute (ICI), Standard & Poor’s and Barclays Index Products to compare mutual fund investor returns to an appropriate set of benchmarks. Covering the period from 1/1/1991–12/31/20, the study utilizes mutual fund sales, redemptions and exchanges each month as the measure of investor behavior. These behaviors reflect the “average investor.” Based on this behavior, the analysis calculates the “average investor return” for various periods. These results are then compared to the returns of respective indices.

Investor Behavior


Buying Stocks After Big Market Drops Has Historically Been Profitable

S&P 500 Index Hypothetical Growth of $10,000 (1980–2020)

Past performance does not guarantee future results. As of 12/31/20. Assumes reinvestment of capital gains and dividends and no taxes. Data Sources: Thomson Reuters and Hartford Funds, 1/21.

Investor Behavior


Many Investors Missed Out on the Post-Financial Crisis Rebound

Growth of S&P 500 Index vs. Domestic Equity Mutual Fund Flows

Past performance does not guarantee future results. As of 12/31/20. S&P 500 Price Index doesn’t reflect the reinvestment of dividends and capital gains. For illustrative purposes only. Data Sources: FactSet and Investment Company Institute, 12/20.

Investor Behavior


When Markets Fall We Search—Especially for CNBC

Google searches for CNBC vs. S&P 500 Index

As of 12/31/20. This is a study of Google searches for “CNBC” compared with S&P 500 Index performance. There’s a correlation between poor market performance and CNBC searches. S&P 500 Price Index doesn’t reflect the reivestment of dividends and capital gains.

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The material on this site is for informational and educational purposes only. The material should not be considered tax or legal advice and is not to be relied on as a forecast. The material is also not a recommendation or advice regarding any particular security, strategy or product. Hartford Funds does not represent that any products or strategies discussed are appropriate for any particular investor so investors should seek their own professional advice before investing. Hartford Funds does not serve as a fiduciary. Content is current as of the publication date or date indicated, and may be superseded by subsequent market and economic conditions.

Investing involves risk, including the possible loss of principal. Investors should carefully consider a fund's investment objectives, risks, charges and expenses. This and other important information is contained in the mutual fund, ETF or closed-end interval fund prospectus or summary prospectus, which can be obtained from a financial professional and should be read carefully before investing.

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