After a painful transition away from the lower-for-longer environment, the return outlook for global fixed income has significantly improved as a result of higher real central-bank policy rates, a greater embedded inflation buffer and positive term premia.^* Bonds look attractive from both a diversification and income perspective, with yields back to levels not seen since before the Global Financial Crisis. So far, so good, but the speed at which markets have rotated through expectations of hard-vs.-soft landing, financial instability, and cycle extensions has served as a vivid reminder that bond investors now face a new macroeconomic regime of shorter and sharper cycles and diverging macroeconomic backdrops. 

We believe the new macroeconomic regime could result in a greater occurrence of idiosyncratic risk—whether from country, sector or individual issuer. In this environment, we think combining the flexibility offered by active management with greater diversification based on fundamental research may be key to future success. An important consideration in this context is the role of geographical diversification. 

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^* The term premium is the amount by which the yield on a long-term bond is greater than the yield on shorter-term bonds. This premium reflects the amount investors expect to be compensated for lending for longer periods.

Important Risks: Investing involves risk, including the possible loss of principal. Security prices fluctuate in value depending on general market and economic conditions and the prospects of individual companies. The Fund may allocate a portion of its assets to specialist portfolio managers, which may not work as intended. • Fixed income security risks include credit, liquidity, call, duration, and interest-rate risk. As interest rates rise, bond prices generally fall. • Foreign investments, including foreign government debt, 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 the Fund focuses in a particular geographic region or country. Diversification does not ensure a profit or protect against loss.  

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.