What’s Driving Markets

1. US-Iran war: US and Israeli military strikes on Iranian territory that resulted in the killing of Supreme Leader Ayatollah Ali Khamenei represent a decisive escalation in a long-running confrontation. The situation remains highly fluid, with significant uncertainty surrounding Iran’s military cohesion, regime stability, and succession dynamics. In the near term, risks point to the potential for further military action and elevated macro and market volatility, particularly related to energy infrastructure and critical shipping lanes such as the Strait of Hormuz. Key variables to monitor include Iran’s targeting choices, the scope of regional escalation, risks to energy-supply chains, and the likelihood of a prolonged conflict. We see the potential for inflation pass-through if oil continues to climb. Front-end break-even curves are already reflecting a portion of this risk. Most importantly, oil shocks are events that central banks are not particularly good at handling. This will likely keep the Federal Reserve (Fed) more cautious, and the market has already reduced the number of cuts priced for 2026.

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. • Mortgage-related and asset-backed securities’ risks include credit, interest-rate, prepayment, and extension risk. The value of the underlying real estate of real estate related securities may go down due to various factors, including but not limited to strength of the economy, amount of new construction, laws and regulations, costs of real estate, availability of mortgages, and changes in interest rates. • 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. • 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. • The risks associated with mortgage-related and asset-backed securities as well as collateralized loan obligations (CLOs) include credit, interest-rate, prepayment, liquidity, default, and extension risk. • Risks of focusing investments on the healthcare-related sector include regulatory and legal developments, changes in funding or subsidies, patent and intellectual property considerations, intense competitive pressures, rapid technological changes, long and costly process for obtaining product approval by government agencies, potential product obsolescence, rising cost of medical products and services, and price volatility risk. • Investments linked to prices of commodities may be considered speculative. • Diversification does not ensure a profit 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.