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Nanette Abuhoff Jacobson, managing director and multi-asset strategist for Wellington Management and global investment strategist for Hartford Funds
Daniel Cook, CFA, Investment Strategy Analyst
2022 is likely to be a year of transition as the market’s focus shifts.
We expect 2022 to be a year of transition, with the market’s focus shifting from COVID-19 to the state of growth and inflation, and the response of central banks. Developed markets are close to moving from pandemic to endemic, with higher vaccination rates and better treatments reducing the risk of further lockdowns. Liquidity remains plentiful for consumers and companies. Consumers have bolstered their savings stockpiles significantly in recent quarters, wages should continue to increase, and spending should rise. Companies, for their part, are benefiting from ideal financing conditions, COVID-driven restructuring, and strong nominal growth, and we believe all of these things should continue and support earnings next year.
Five Investment Essentials for a Post-Pandemic World
Nick Samouilhan, PhD, CFA, FRM, Multi-Asset Strategist and Portfolio Manager, Singapore
Andrew Sharp-Paul, Investment Director, Singapore
As the world "gets back to business" in 2022, a cautiously optimistic outlook seems warranted. For investors, it may be a year to think thematically.
With some luck, and a bit of hope, we are cautiously optimistic that 2022 should be the year in which most of the world begins to move toward a post-pandemic era—albeit after many fits and starts along the way. From a public health perspective, COVID-19 vaccination rates and other telling numbers (including case counts, hospitalizations, and virus-related deaths) suggest that the life-altering global pandemic may finally be poised to start winding down. In addition, many world economies are growing and appear to be on a path toward recovery from the unprecedented COVID-19 shock.
John Butler, Macro Strategist
We expect the recovery to continue in 2022, despite rising inflation and slowing economic growth causing stagflation fears.
As we look ahead to 2022, should investors fear a return to stagflation—the toxic mix of high inflation and low growth that blighted the global economy during much of the 1970s—or are the sharp price rises and the slowing recovery only temporary? We expect this debate to intensify over the next five to six months as high energy prices, supply bottlenecks, and labor shortages take their toll.
Geopolitics in 2022: Turbulence Ahead?
Thomas Mucha, Managing Director and Geopolitical Strategist
The threat of great-power competition will merge with the worsening climate crisis to produce a world of heightened national-security risks.
In my view, 2022 will present one of the most complex, unpredictable, and potentially dangerous geopolitical backdrops in decades.
Several factors drive this elevated risk, starting with structural changes in the geopolitical environment that include a more competitive world order, rising economic inequality, and political dysfunction globally. We are also witnessing the growing national-security implications of climate change.
After The Inflection Point: How The Climate Challenge Will Transform The Global Economy
Thomas Mucha, Geopolitical Strategist
Santiago Millán, CFA, Macro Strategist
Juhi Dhawan, PhD, Macro Strategist
The response to climate change, on both the spending and regulatory fronts, will dramatically reshape economic and market outcomes in a way that investors cannot afford to ignore.
Wellington’s Central Macro Team believes climate change is an emerging megatrend that will reshape the global economy, and one that we’ll be studying from a variety of perspectives in 2022 and for many years to come. Recent headlines—from deadly flooding in China and Germany to historic wildfires and hurricanes in the US—are adding momentum to the trend.
In this note, we outline the conclusions from a joint research project that our team, working closely with Wellington’s Climate Research Team, conducted on the global, regional, and geopolitical implications of reshaping the world’s economic framework for a lower-carbon future.
The Tech Driving Disruption (and Opportunity) in 2022
Brian Barbetta, Global Industry Analyst
Bruce Glazer, Global Industry Analyst
Michael Masdea, Head of Investment Science
Yash Patodia, Global Industry Analyst
The tech landscape may continue to be impacted by competing macro headwinds, but enduring secular trends may continue to drive growth.
The future remains on sale, in our view, as we look to technology and innovation investing in 2022. In 2021, global markets were dominated by macro factors such as rising rates, supply-chain issues, disparate reopenings, and inflation concerns—causing fundamentals to take a back seat.
Is It Time To Be All in on Equity Income?
Kat Price, CAIA, Investment Director
Gregg Thomas, CFA, Director of Investment Strategy
Broader fundamentals for high-yielding stocks present opportunity for equity-income investors.
Across global-equity markets, dividend levels have been driven to lows not seen since the late 1990s. What does this mean for income-oriented equity strategies going forward? Wellington considers the answer through their team’s factor lens.
Healthcare in 2022: Innovation and Opportunity
Charles Seidman, CFA, Investment Director
COVID-19 continues to reshape how we view healthcare and the opportunities it presents in the year ahead.
As we close 2021, the world is in various stages of recovery from the global COVID-19 pandemic. Notably, though the healthcare sector has performed well since the start of the crisis, it has lagged the broader market as consumer-oriented and information-technology sectors benefited more from the reopening of the economy. While COVID-19 disruptions could continue for months, we believe strong fundamentals and robust innovation will fuel growth across healthcare sectors in the year ahead.
Emerging Markets: China, India, and Thematic Opportunities
Graham Proud, Investment Director
As we look toward 2022, we see a range of investment opportunities within the diverse EM universe.
As we approach 2022, evolving political environments and diverging COVID-19 recovery paths are among the drivers of dispersion between and within emerging markets (EM). Meanwhile, technology adoption, infrastructure development, and urbanization are a few of the trends fueling growth across many of these markets. In this outlook, we explore how these factors impact opportunities and risks in Chinese equities, the potential for a bright future in India, and several enduring themes across EMs.
Campe Goodman, CFA, Fixed Income Portfolio Manager
Robert Burn, CFA, Fixed Income Portfolio Manager
There's a case to be made for risk reduction in fixed-income portfolios, but we also think there are pockets of attractive value in some non-traditional sectors.
As we enter 2022, we believe there are two key takeaways fixed-income investors should think about: 1) paring back some risk exposures as 2022 takes shape; and 2) turning to select non-traditional sectors for higher total-return potential.
Ushering in a New Rate Paradigm
Amar Reganti, Fixed Income Investment Director
Jitu Naidu, Client Portfolio Manager
Central banks were once reliable drivers of economies and business cycles. No longer. Shifting market developments now require a more flexible monetary approach.
As we enter 2022, we are witnessing a seismic and rather abrupt shift in the global monetary policy framework. Notably, the big developed-market (DM) central banks are gradually moving away from traditional forward guidance toward emphasizing greater policy flexibility and better risk management in response to economic and market developments. Based on recent central-bank decisions, we think market participants will be less inclined to see monetary policymakers as reliable forecasters or drivers of economies and business cycles.
Bank Loans May Be Well-Positioned for Nearing Rate Hikes
David Marshak, Managing Director, Portfolio Manager for the Hartford Floating Rate Fund and Hartford Floating Rate High Income Fund
We believe that fixed-income investors looking for income and total return could be well served by considering bank loans for their portfolios in 2022.
Unlike most other fixed-income asset classes, where rising rates can be a significant headwind, bank loans can directly benefit from rising short-term rates. Bank-loan coupons are set by 1-month or 3-month rates plus a spread, so as the Federal Reserve hikes rates, bank-loan coupons mechanically adjust upward, increasing income to investors (some loans have rate floors and will benefit from rising rates once rates exceed those floors).
Sustainable Investing Outlook
Impact Investing: Seeking Solutions That Help the World Recover
Tara Stilwell, CFA, Portfolio Manager for the Hartford Global Impact Fund
The new year brings continued efforts to seek solutions related to financial inclusion,digital divides, and healthcare.
In 2022, research across our impact themes will continue with a particular focus on impact opportunities in financial inclusion, digital divide, and healthcare. As always, we aim to invest in companies whose core goods and services address the world’s biggest social and environmental challenges. The COVID-19 pandemic and ensuing economic slowdown exacerbated fundamental socioeconomic inequities and heightened the need for financial-, digital-, and health-related solutions. In 2022, we’ll examine several themes through the lens of climate change, noting the accelerating demand for climate adaptation and mitigation, as well as the growing overlap between climate- and impact-investing solutions.
-
Multi-Asset Outlook
Nanette Abuhoff Jacobson, managing director and multi-asset strategist for Wellington Management and global investment strategist for Hartford Funds
Daniel Cook, CFA, Investment Strategy Analyst
2022 is likely to be a year of transition as the market’s focus shifts.
We expect 2022 to be a year of transition, with the market’s focus shifting from COVID-19 to the state of growth and inflation, and the response of central banks. Developed markets are close to moving from pandemic to endemic, with higher vaccination rates and better treatments reducing the risk of further lockdowns. Liquidity remains plentiful for consumers and companies. Consumers have bolstered their savings stockpiles significantly in recent quarters, wages should continue to increase, and spending should rise. Companies, for their part, are benefiting from ideal financing conditions, COVID-driven restructuring, and strong nominal growth, and we believe all of these things should continue and support earnings next year.
Five Investment Essentials for a Post-Pandemic World
Nick Samouilhan, PhD, CFA, FRM, Multi-Asset Strategist and Portfolio Manager, Singapore
Andrew Sharp-Paul, Investment Director, Singapore
As the world "gets back to business" in 2022, a cautiously optimistic outlook seems warranted. For investors, it may be a year to think thematically.
With some luck, and a bit of hope, we are cautiously optimistic that 2022 should be the year in which most of the world begins to move toward a post-pandemic era—albeit after many fits and starts along the way. From a public health perspective, COVID-19 vaccination rates and other telling numbers (including case counts, hospitalizations, and virus-related deaths) suggest that the life-altering global pandemic may finally be poised to start winding down. In addition, many world economies are growing and appear to be on a path toward recovery from the unprecedented COVID-19 shock.
-
Global Macro Outlook
John Butler, Macro Strategist
We expect the recovery to continue in 2022, despite rising inflation and slowing economic growth causing stagflation fears.
As we look ahead to 2022, should investors fear a return to stagflation—the toxic mix of high inflation and low growth that blighted the global economy during much of the 1970s—or are the sharp price rises and the slowing recovery only temporary? We expect this debate to intensify over the next five to six months as high energy prices, supply bottlenecks, and labor shortages take their toll.
Geopolitics in 2022: Turbulence Ahead?
Thomas Mucha, Managing Director and Geopolitical Strategist
The threat of great-power competition will merge with the worsening climate crisis to produce a world of heightened national-security risks.
In my view, 2022 will present one of the most complex, unpredictable, and potentially dangerous geopolitical backdrops in decades.
Several factors drive this elevated risk, starting with structural changes in the geopolitical environment that include a more competitive world order, rising economic inequality, and political dysfunction globally. We are also witnessing the growing national-security implications of climate change.
After The Inflection Point: How The Climate Challenge Will Transform The Global Economy
Thomas Mucha, Geopolitical Strategist
Santiago Millán, CFA, Macro Strategist
Juhi Dhawan, PhD, Macro Strategist
The response to climate change, on both the spending and regulatory fronts, will dramatically reshape economic and market outcomes in a way that investors cannot afford to ignore.
Wellington’s Central Macro Team believes climate change is an emerging megatrend that will reshape the global economy, and one that we’ll be studying from a variety of perspectives in 2022 and for many years to come. Recent headlines—from deadly flooding in China and Germany to historic wildfires and hurricanes in the US—are adding momentum to the trend.
In this note, we outline the conclusions from a joint research project that our team, working closely with Wellington’s Climate Research Team, conducted on the global, regional, and geopolitical implications of reshaping the world’s economic framework for a lower-carbon future.
-
Global Equities Outlook
The Tech Driving Disruption (and Opportunity) in 2022
Brian Barbetta, Global Industry Analyst
Bruce Glazer, Global Industry Analyst
Michael Masdea, Head of Investment Science
Yash Patodia, Global Industry Analyst
The tech landscape may continue to be impacted by competing macro headwinds, but enduring secular trends may continue to drive growth.
The future remains on sale, in our view, as we look to technology and innovation investing in 2022. In 2021, global markets were dominated by macro factors such as rising rates, supply-chain issues, disparate reopenings, and inflation concerns—causing fundamentals to take a back seat.
Is It Time To Be All in on Equity Income?
Kat Price, CAIA, Investment Director
Gregg Thomas, CFA, Director of Investment Strategy
Broader fundamentals for high-yielding stocks present opportunity for equity-income investors.
Across global-equity markets, dividend levels have been driven to lows not seen since the late 1990s. What does this mean for income-oriented equity strategies going forward? Wellington considers the answer through their team’s factor lens.
Healthcare in 2022: Innovation and Opportunity
Charles Seidman, CFA, Investment Director
COVID-19 continues to reshape how we view healthcare and the opportunities it presents in the year ahead.
As we close 2021, the world is in various stages of recovery from the global COVID-19 pandemic. Notably, though the healthcare sector has performed well since the start of the crisis, it has lagged the broader market as consumer-oriented and information-technology sectors benefited more from the reopening of the economy. While COVID-19 disruptions could continue for months, we believe strong fundamentals and robust innovation will fuel growth across healthcare sectors in the year ahead.
Emerging Markets: China, India, and Thematic Opportunities
Graham Proud, Investment Director
As we look toward 2022, we see a range of investment opportunities within the diverse EM universe.
As we approach 2022, evolving political environments and diverging COVID-19 recovery paths are among the drivers of dispersion between and within emerging markets (EM). Meanwhile, technology adoption, infrastructure development, and urbanization are a few of the trends fueling growth across many of these markets. In this outlook, we explore how these factors impact opportunities and risks in Chinese equities, the potential for a bright future in India, and several enduring themes across EMs.
-
Fixed-Income Outlook
Campe Goodman, CFA, Fixed Income Portfolio Manager
Robert Burn, CFA, Fixed Income Portfolio Manager
There's a case to be made for risk reduction in fixed-income portfolios, but we also think there are pockets of attractive value in some non-traditional sectors.
As we enter 2022, we believe there are two key takeaways fixed-income investors should think about: 1) paring back some risk exposures as 2022 takes shape; and 2) turning to select non-traditional sectors for higher total-return potential.
Ushering in a New Rate Paradigm
Amar Reganti, Fixed Income Investment Director
Jitu Naidu, Client Portfolio Manager
Central banks were once reliable drivers of economies and business cycles. No longer. Shifting market developments now require a more flexible monetary approach.
As we enter 2022, we are witnessing a seismic and rather abrupt shift in the global monetary policy framework. Notably, the big developed-market (DM) central banks are gradually moving away from traditional forward guidance toward emphasizing greater policy flexibility and better risk management in response to economic and market developments. Based on recent central-bank decisions, we think market participants will be less inclined to see monetary policymakers as reliable forecasters or drivers of economies and business cycles.
Bank Loans May Be Well-Positioned for Nearing Rate Hikes
David Marshak, Managing Director, Portfolio Manager for the Hartford Floating Rate Fund and Hartford Floating Rate High Income Fund
We believe that fixed-income investors looking for income and total return could be well served by considering bank loans for their portfolios in 2022.
Unlike most other fixed-income asset classes, where rising rates can be a significant headwind, bank loans can directly benefit from rising short-term rates. Bank-loan coupons are set by 1-month or 3-month rates plus a spread, so as the Federal Reserve hikes rates, bank-loan coupons mechanically adjust upward, increasing income to investors (some loans have rate floors and will benefit from rising rates once rates exceed those floors).
-
Sustainable Investing Outlook
Sustainable Investing Outlook
Impact Investing: Seeking Solutions That Help the World Recover
Tara Stilwell, CFA, Portfolio Manager for the Hartford Global Impact Fund
The new year brings continued efforts to seek solutions related to financial inclusion,digital divides, and healthcare.
In 2022, research across our impact themes will continue with a particular focus on impact opportunities in financial inclusion, digital divide, and healthcare. As always, we aim to invest in companies whose core goods and services address the world’s biggest social and environmental challenges. The COVID-19 pandemic and ensuing economic slowdown exacerbated fundamental socioeconomic inequities and heightened the need for financial-, digital-, and health-related solutions. In 2022, we’ll examine several themes through the lens of climate change, noting the accelerating demand for climate adaptation and mitigation, as well as the growing overlap between climate- and impact-investing solutions.
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 the Fund focuses in a particular geographic region or country. • 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. • 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. • Focusing on investments that involve climate change opportunities or sustainable and environmental initiatives may result in foregoing certain investments and underperformance comparative to funds that do not have a similar focus. • Risks of focusing investments on the healthcare related sector include regulatory and legal developments, patent considerations, intense competitive pressures, rapid technological changes, potential product obsolescence, and liquidity risk. • Investing in companies that seek to address major social and environmental challenges may cause the Fund to forego certain investment opportunities and underperform funds that do not have a similar focus. The exclusion of certain issuers for reasons other than performance may negatively impact the Fund’s performance.
The views expressed here are those of Wellington Management. They should not be construed as investment advice. They are based on available information and are subject to change without notice. Portfolio positioning is at the discretion of the individual portfolio management teams; individual portfolio management teams and different fund sub-advisers may hold different views and may make different investment decisions for different clients or portfolios. This material and/or its contents are current as of 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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