Many fixed-income investors continue to position portfolios for a cyclical rebound in economic activity.1 We acknowledge that the extraordinary monetary and fiscal stimulus by global central banks and governments, along with ongoing vaccination rollouts, will spur continued economic recovery. However, we observe long-term structural changes that could lead to an environment of increased frequency of dislocations across fixed-income markets. We’ve been in a long-term trend of falling interest rates and tightening credit spreads2 that caused most traditional fixed-income benchmarks to perform well, particularly the ones with longer durations and meaningful credit components. But we believe 2021 will be characterized by transition to a new fixed-income reality, and that investors should focus on how to generate total returns when neither duration3 nor credit are an obvious solution.
1 Based on our analysis of separate accountand mutual fund positioning in eVestmentand Morningstar
2 Spreads are the difference in yields between two fixed-income securities with the same maturity, but originating from different investment sectors.
3 Duration is a measure of the sensitivity of an investment’s price to nominal interest-rate movement.
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. • 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 US investments and are subject to the risk of currency fluctuations and adverse political, economic and regulatory developments. • Diversification does not ensure a profit or protect against a loss in a declining market.
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.
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.
Your session has expired. Please login again.