First, the bad news: Global fixed-income markets have undergone an extremely challenging 2022, with historically negative stock/bond correlations breaking down and leaving even diversified investors with seemingly no place to hide. Indeed, many credit-market segments have posted dismal year-to-date performance, stemming from a combination of sharply higher government bond yields and wider credit spreads as the US Federal Reserve (Fed) and other global central banks have aggressively tightened monetary policies in an effort to rein in persistent inflation.
Now the good news: While this year’s economic and market turmoil has led to negative total returns in most fixed-income sectors, the widespread sell-off and continued volatility have also created some attractive opportunities for discerning credit investors with longer-term time horizons.
Important Risks: Investing involves risk, including the possible loss of principal. • 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. • 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, economic and regulatory developments. These risks may be greater, and include additional risks, for investments in emerging markets. • Mortgage-related and asset-backed securities’ risks include credit, interest-rate, prepayment, and extension risk. • Derivatives are generally more volatile and sensitive to changes in market or economic conditions than other securities; their risks include currency, leverage, liquidity, index, pricing, regulatory and counterparty risk. • Investments in the commodities market may increase liquidity risk, volatility and risk of loss if adverse developments occur. • Investments linked to prices of commodities may be considered speculative. Significant exposure to commodities may subject investors to greater volatility than traditional investments. The value of such instruments may be volatile and fluctuate widely based on a variety of factors. Diversification does not ensure or protect against a loss in declining 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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