• Log In
  • Account Access
  • Contact Us

    Pre-Sales Support

    Mutual Funds and ETFs - 800-456-7526
    Monday-Thursday: 8:00 a.m. – 6:00 p.m. ET
    Friday: 8:00 a.m. – 5:00 p.m. ET

    ETF Trading Support - 415-315-6600
    Monday-Friday: 9:30 a.m. – 5:00 p.m. ET

    Post-Sales and Website Support
    888-843-7824
    Monday-Friday: 9:00 a.m. - 6:00 p.m. ET

Charts That Got Us Thinking
Charts That Got Us Thinking

3Q17: New Info, New Strategies for the Second Half

Jump to chart out of 49 GO »

YTD performance: Reflationary trade in doubt


Is the reflationary trade over? Yes and no. Equities outperformed bonds but financials and commodities lagged.


*Based on commodity price, not represented by an index.
**Gross Returns
1Through 23 June 2017 | Past performance is not indicative of future results. The performance shown above is index performance and is not representative of a fund’s performance. Indexes are unmanaged and not available for direct investment.
See Index Definitions below.
Sources: Bloomberg, Wellington

Global synchronized expansion


Global growth is strong across both developed and emerging markets.


Purchasing Managers Index (PMI) is an indicator that measures economic health. A reading above 50 signals expansion from the current growth rate and a reading below 50 signals contraction from the current growth rate. | Sources: Haver, Markit

Where’s the tapering?


Talk of tapering has begun but there’s still lots of liquidity in the system.


European Central Bank (ECB), Bank of Japan (BOJ), and US Federal Reserve (Fed)
Source: Bloomberg

Japan’s consumer recovers


With low unemployment in Japan, spending is picking up.


Source: Bloomberg

Japan’s manufacturing cycle is improving


Japanese companies have sat on cash for too long and are overdue for capital spending on IT and other areas.


1PMI through April 2017, industrial production through May 2017
Purchasing Managers Index (PMI) is an indicator that measures economic health. A reading above 50 signals expansion from the current growth rate and a reading below 50 signals contraction from the current growth rate. | Sources: Haver, Wellington Management

Japanese equities may depend less on the yen


A weak yen helps Japanese equities, and the improving economy and structural reforms also support the case for Japan equities.


Past performance is no guarantee of future results. The performance shown above is index performance and is not representative of any fund’s performance. Indices are unmanaged and not available for direct investment. For illustrative purposes only.
The right-hand scale shows how many Japanese Yen are equal to one US dollar.
*Gross returns
1Through 13 June 2017 | Source: Bloomberg
See below for index definitions.

Japan’s unloved equity market


Foreign purchases into Japanese equities have lagged the performance of the stock market in recent years; these purchases could pick up.


Past performance is no guarantee of future results. The performance shown above for the Nikkei 225 is index performance and is not representative of any fund’s performance. Indices are unmanaged and not available for direct investment.
Sources: SG Cross Asset Research, Bloomberg
See below for index definitions.

European consumer confidence implies stronger retail sales


Europe is enjoying a robust recovery in consumer spending, and consumer confidence is at a 16-year high.


1Consumer confidence through June 2017, retail sales through April 2017
Purchasing Managers Index (PMI) is an indicator that measures economic health. A reading above 50 signals expansion from the current growth rate and a reading below 50 signals contraction from the current growth rate. | Sources: Haver, Wellington Management

Leading business indicators turn positive in Europe


Manufacturing PMI hit a seven-year high and there are few signs of inflation, so there’s no urgency to raise rates.


1PMI through May 2017, industrial production through April 2017
Purchasing Managers Index (PMI) is an indicator that measures economic health. A reading above 50 signals expansion from the current growth rate and a reading below 50 signals contraction from the current growth rate.
Gross domestic product is the monetary value of all finished goods and services produced within a country’s borders in a specific time period. | Sources: Haver, Wellington Management

Earnings upside for European companies


European earnings have lagged the US. A little bit of inflation could go a long way in closing the gap.


Earnings per share is the portion of a company’s profit allocated to each outstanding share of common stock. | Source: Bloomberg Barclays

Tighter financial conditions in China


Higher rates in China are creating tighter financial conditions.


1Through 14 June 2017 | Source: Bloomberg

Chinese consumer is emerging


While Chinese banks are feeling the impact of tighter financial conditions, Chinese consumers are continuing to make purchases.


1Consumer confidence through April 2017, retail sales through May 2017 | Sources: Haver, Wellington Management

Emerging economies’ current accounts have improved


Emerging markets current accounts (exports – imports) have recovered from a deep deficit.


The current account is an important indicator of an economy’s health. It is defined as the sum of the balance of trade (goods and services exports less imports), net income from abroad, and net current transfers. | Sources: Haver, Wellington Management
See below for index definitions.

Small business optimism has notched down but is still elevated


Small business remains very optimistic about the Trump administration’s pro-business agenda.


National Federation of Independent Business (NFIB) Index of Small Business Optimism measures whether business owners expect business conditions to get better or worse in the near future. | Sources: NFIB, Bloomberg

Capital expenditures (capex) intentions leading capex spending


Capital spending has picked up, but falling intentions could reverse animal spirits.


1Expected growth in capital spending over next 12 months. Intention through 2Q2017, actual through 1Q2017 | Capex intention is the amount CFOs plan to spend on capital expenditures, and capex actual is the amount they actually spent on capital expenditures.
Sources: Duke University, Haver

Key US political dates drive action


In politics, the calendar drives action. There aren’t many days left to get legislation passed before the mid-term election campaigns begin.

Tight labor markets leading to higher wages


Labor shortages are leading to higher wages.


National Federation of Independent Business (NFIB): skilled labor shortages is the % of respondents signaling that quality of labor is their single most important problem.
Sources: BLS, NFIB, Haver

Market well below Fed’s rate expectations


There is a big gap between market’s and Fed’s rate expectations.


As of 14 June 2017 | Market and Federal Reserve expectations for Fed funds rate at end of each year. Fed runs rate is the rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution overnight. Actual results may vary, perhaps significantly, from the forecasts presented. | Sources: Federal Reserve, Bloomberg, Wellington Management

Higher short-term rates help bank margins


Many loan books are tied to short-term rates. Higher short-term rates help earnings.


Sources: Moody’s, Bloomberg | LIBOR (London Interbank Offered Rate) is the world’s most widely used benchmark for short-term interest; it is the interest rate at which banks bank borrow funds from other banks in the London interbank market.

USD strength supported by monetary policy divergence


The US is still the “high yielder” relative to other regions.


1Through 26 June 2017 | Note: real yields are from inflation-linked bonds | Source: Bloomberg

The feedback loop of oil prices and production


The supply-and-demand rebalancing mechanism seems to have broken down recently.


Sources: Baker Hughes, Energy Information Administration, Bloomberg

Regional equity valuations are expensive except in Japan


Good or improving fundamentals are mostly priced in for the US and Europe, but not for Japan.


Note: A 10-year percentile indicates the percentage of historical observations which are lower than the current observation. For example, a 10-year percentile of 90% indicates that valuations have been cheaper 90% of observations over the prior 10 years. Each metric is based on consensus 12-month forward estimates of earnings, book value, sales, or cash flow.
Price to earnings is the ratio of a stock’s price to its earnings per share.
Price to book is the ratio of a stock’s price to its book value per share.
Price to sales compares a company’s stock price to its revenues.
Price to cash flow is the ratio of a stock’s price to its cash flow per share.
Shiller price to earnings is the ratio of price to trailing 10-year real earnings.
Note: all metrics use forward estimates except Shiller price to earnings. | Sources: Datastream, IBES, Wellington Management

Low-volatility equities are expensive


Valuations in low-volatility equities remain expensive.


1Data through 24 June 2017
Price/Earnings ratio is the ratio of a stock’s price to its earnings per share.
Price/Book ratio is the ratio of a stock’s price to its book value per share.
Low-volatility stocks are defined as the 150 lowest volatility stocks of the largest 1,500 US equities. High-volatility stocks are defined as the 150 most volatile stocks of the largest 1,500 US equities. | Source: Wellington Management

Valuations are expensive across most asset classes


Red represents rich markets. The percentiles suggest that most asset classes look expensive with few exceptions.

As of 31 May 2017
1Option-adjusted spread (OAS) measures fixed-income yields while taking into account any embedded options.
2A basis point is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security.
3Price-to-Book Ratio (P/B ratio) is the ratio of a stock’s price to its book value per share. Green shading represents relatively inexpensive valuations, red shading represents relatively expensive valuations.
US high yield is represented by the Bloomberg Barclays US Corporate High Yield Index; US high yield ex energy is represented by the Bloomberg Barclays US Corporate High Yield Index ex Energy; US IG corporate is represented by the Bloomberg Barclays US Corporate Index; Global high yield is represented by the Bloomberg Barclays Global High Yield Index; Euro IG corporate is represented by the Bloomberg Barclays Euro Corporate Index; EMBI+ is an abbreviation for the JPMorgan Emerging Markets Bond Index Plus; US is represented by the MSCI USA Index; Europe is represented by the MSCI Europe Index; Japan is represented by the MSCI Japan Index; EM is represented by the MSCI Emerging Markets Index
Sources: Bloomberg, Datastream, Wellington Management

Peak defaults probably behind us


After the energy crisis in early 2016, defaults are decreasing.


Actual results may vary, perhaps significantly, from the estimated data presented
Source: Moody’s

Bank loan valuations look attractive


Investors don’t have to sacrifice much yield if they invest in bank loans instead of high-yield bonds.


Past performance is not a guarantee of future results. The performance shown is index performance and is not representative of any funds’ performance. Investors cannot invest directly in an index.
The chart shows the yield for high-yield bonds minus the yield for bank loans. Bank loans, represented by the Credit Suisse Leveraged Loan Index, are below-investment-grade, senior secured, short-term loans made by banks to corporations. They are rated below-investment-grade because there is a greater possibility that the issuer may be unable to make interest and principal payments on those securities. High-yield bonds, or “junk bonds,“ represented by the Bloomberg Barclays US Corporate High Yield Bond Index, are rated below-investmentgrade because there is a greater possibility that the issuer may be unable to make interest and principal payments on those securities.
Sources: Bloomberg Barclays, Credit Suisse, JPMorgan

High yield outperformance makes EM debt attractive


Investors don’t have to sacrifice much yield if they consider switching from high-yield bonds to emerging markets debt.


1Through 14 June 2017
Past performance is not a guarantee of future results. The performance shown is index performance and is not representative of any funds’ performance. Investors cannot invest directly in an index.
The chart shows the spread over Treasuries for high-yield bonds minus the spread over Treasuries for emerging markets sovereign debt.
Emerging markets sovereign debt is represented by the JP Morgan Emerging Markets Bond Index Plus.
High-yield bonds, or “junk bonds,“ represented by the Bloomberg Barclays US Corporate High Yield Bond Index, are rated below-investment-grade because there is a greater possibility that the issuer may be unable to make interest and principal payments on those securities.
Source: Bloomberg

Think Function, Not Form: Consider diversifying exposure across economic environments


While most assets tend to perform well in a growth environment with benign inflation, think about whether you have assets that perform well in an inflationary environment, either with growth (top right hand) or without (bottom righthand).


Diversification does not ensure a profit or protect against a loss in a declining market.
EMD: Emerging Markets Debt
REITs: Real Estate Investment Trust
ILBs: Inflation-Linked Bonds
MBS: Mortgage-Backed Securities
TIPS: Treasury Inflation Protected Securities

The example presented is for illustrative purposes and reflects the current opinions of Wellington Management’s Asset Allocation Strategies Group as of the date appearing in this material only. This is based on historical assumptions and is not intended to be a prediction of how any asset class will perform in the future. | Economic environments are defined by year-over-year changes in GDP growth and inflation. Growth: + GDP growth, - inflation. Weak growth: - GDP growth, - inflation. Inflation: + GDP growth, + inflation. Stagflation: - GDP growth, + inflation.

Buying stocks when fear runs high has historically led to long-term gains


Assumes reinvestment of capital gains and dividends and no taxes. Past performance is not a guarantee of future returns.
1The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) is a key measure of market expectations of near‐term volatility conveyed by S&P 500 stock index option prices. VIX, commonly referred to as the "Fear Index," is the ticker symbol for the CBOE's Volatility Index and measures the market's expectation of 30-day volatility. VIX levels below 20 reflect complacency, while levels of 40 or higher reflect extremely high levels of volatility.
* This column shows the S&P 500 Index's one-day loss on the date shown in column 1.
Data Source: Morningstar, 1/17

Intra-year dips in the S&P 500 Index happen frequently


Past performance is not a guarantee of future results. The performance shown is index performance and is not representative of any funds’ performance. Investors cannot invest directly in an index. Assumes reinvestment of capital gains and dividends and no taxes. | Data Source: Morningstar, 1/17

Are you an opportunistic or apprehensive investor?


1T-Bills are guaranteed as to the timely payment of principal and interest by the U.S. Government and generally have lower risk-and-return than bonds and equity. Equity investments are subject to market volatility and have greater risk than T-Bills and other cash investments.
Past performance is not a guarantee of future results. The performance shown above is index performance and is not representative of any fund’s performance. Indices are unmanaged and not available for direct investment. Assumes reinvestment of capital gains and dividends and no taxes. | Data Source: Thomson Reuters, 1/17.

The cyclical nature of active and passive investing


While passive investments have performed well in recent years, active large-blend funds outperformed their passive counterparts nine out of 10 times from 2000 to 2009.


Performance for the Morningstar Large Blend Category is net of fees. “Active Large Blend” is made up of funds from the Morningstar Large Blend category that are not index or enhanced index funds. “Passive Large Blend” is represented by the Morningstar S&P 500 Tracking Category.
Past performance is not indicative of future results. Indices are unmanaged and not available for direct investment.
Data Source: Morningstar, 1/17

Are value stocks poised to outperform growth stocks after a long period of underperformance?


While growth stocks and value stocks historically alternate periods of outperformance, growth stocks have generally outperformed value stocks since January 2009.


Growth stocks are represented by S&P 500 Growth Index. Value stocks are represented by S&P 500 Value Index. The chart shows the values of the S&P 500 Value Index’s returns minus the S&P 500 Growth Index’s returns. When the line is above 0, value stocks outperformed growth stocks. When it is below 0, growth stocks outperformed value stocks.

Past performance is not a guarantee of future results. The performance shown above is index performance and is not representative of any fund’s performance. Indices are unmanaged and not available for direct investment. For illustrative purposes only. | Source: Morningstar, 1/17

Are international stocks poised to outperform US stocks after a long period of underperformance?


The average performance cycle for US equities versus international equities has historically lasted 7.1 years. US equities have outperformed international equities over the past 5.8 years, indicating the cycle may be getting ready to turn.


US Equity is represented by S&P 500 Index. International Equity is represented by MSCI World ex USA Index. The chart shows the values of the S&P 500 Index’s returns minus the MSCI World ex USA Index’s returns. When the line is above 0, domestic stocks outperformed international stocks. When it is below 0, international stocks outperformed domestic stocks.

Past performance is not a guarantee of future results. The performance shown above is index performance and is not representative of any fund’s performance. Indices are unmanaged and not available for direct investment. For illustrative purposes only.
Source: Morningstar, 6/17

Growth is gaining momentum outside the US


With buoyant financial markets and a long-awaited cyclical recovery in manufacturing and trade under way, world growth is projected to rise, especially for developing economies.

Real GDP Growth is a macroeconomic measure of the value of economic output adjusted for price changes (i.e., inflation or deflation). | Source: IMF, World Economic Outlook, 4/17

Stock market returns after significant oil price declines


West Texas Intermediate (WTI), also known as Texas light sweet, is a grade of crude oil used as a benchmark for oil prices.
Data Sources: Federal Reserve Bank of St. Louis (from 1/1/86 to present) and Bloomberg (1/1/84 – 12/31/85)

Asset class returns vs. the average investor


According to a study by Dalbar, the average mutual fund investor has dramatically underperformed market indexes by buying and selling at the wrong times.


For illustrative purposes only.
Past performance is not a guarantee of future returns. Indices are unmanaged and not available for direct investment.
US Equities: S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
Bonds: Bloomberg Barclays U.S. Aggregate Bond Index is composed of securities from the Barclays Government/Credit Bond Index, Mortgage-Backed Securities Index, Asset-Backed Securities Index, and Commercial Mortgage-Backed Securities Index.
Inflation: CPI-All Urban Consumers is a measure of inflation that includes all urban households and urban places of 2,500 inhabitants or more. The index excludes rural consumers and the military and institutional population and represents the buying habits of approximately 80% of the U.S. population.
Dalbar’s Quantitative Analysis of Investor Behavior Methodology - Dalbar’s Quantitative Analysis of Investor Behavior uses data from the Investment Company Institute (ICI), Standard & Poor’s and Bloomberg Barclays Index Products to compare mutual fund investor returns to an appropriate set of benchmarks. Covering the period ending December 31, 2016, the study utilizes mutual fund sales, redemptions and exchanges each month as the measure of investor behavior. These behaviors reflect the “average investor.” Based on this behavior, the analysis calculates the “average investor” return for various periods. These results are then compared to the returns of respective indices. | Source: Dalbar, 4/17.

Duration risk is rising: Are you prepared?


In June, the duration of the Bloomberg Barclays US Aggregate Bond Index exceeded six years for the first time since 1978. Fixed-income investors should consider evaluating the duration risk in their portfolios.


Effective duration is a measure of the sensitivity of an investment’s price to nominal interest-rate movement. | Source: Barclays Live

Hypothetical impact of rising rates on fixed income


Chart is for illustrative purposes only. Past performance is not a guarantee of future results.
1Calculation assumes 2-year Treasury interest rate falls 0.67% to 0.00%, as interest rates can only fall to 0.00%.
Source: Bloomberg Barclays. Fixed income sectors shown above are provided by Barclays and are represented by – Broad Market: U.S. Aggregate Bond Index; MBS: U.S. Aggregate Securitized - MBS Index; Corporate: U.S. Corporates; Municipals: Muni Bond 10-year Index; High Yield: US Corporate High Yield Bond Index; TIPS: Treasury Inflation Protected Securities (TIPS). Floating Rate: FRN (BBB); Convertibles: U.S. Convertibles Composite; ABS: U.S. ABS Index; CMBS: U.S. CMBS Index. Change in bond price is calculated using both duration and convexity according to the following formula: New Price = (Price + (Price * -Duration * Change in Interest Rates))+(0.5 * Price * Convexity * (Change in Interest Rates)^2).

Some asset classes have performed well in rising-rate periods


We examined 10 rising-rate periods since 2005 (defined as a spike of 20% or more in the yield of the 10-Year Treasury), and these asset classes performed the best.


The performance shown above is index performance and is not representative of any fund's performance. Indices are unmanaged and not available for direct investment. For illustrative purposes only.
Data Source: Morningstar, 7/17.
Stocks are represented by the S&P 500 Index, which is a market-cap-weighted price index composed of 500 widely held common stocks.
Bank loans are represented by the Credit Suisse Leveraged Loan Index, which is designed to mirror the investible universe of the US dollar-denominated leveraged loan market.
High-yield bonds are represented by the Bloomberg Barclays US Corporate High Yield Index, which is an unmanaged, broad-based market-value-weighted index that tracks the total return performance of non-investment grade, fixed-rate, publicly placed, dollar-denominated and nonconvertible debt registered with the Securities and Exchange Commission. US REITs are represented by the MSCI US REIT Index, which is a free-float market-cap-weighted benchmark comprised of equity REIT securities that belong to the MSCI US Investable Market 2500 Index.

US stock reactions to fast vs. slow rate hikes


During fast rate-hike cycles, stocks have historically lost an average of 2.7% after one year. By contrast, slow rate-hike cycles have historically resulted in an average stock gain of 10.8% after one year.


Source: S&P Dow Jones Indices, Ned Davis Research. Analysis of 12 post-war tightening cycles. In a “fast” cycle, rate hikes took place after back-to-back FOMC meetings (there are typically eight per year), “slow” cycles weren’t consecutive. Before tightening cycles (left of the green line), stocks moved in a similar fashion. After tightening cycles (right of the green line), stocks performed significantly better after slow cycles than after fast ones. To normalize S&P Index values for different time periods, the S&P value is shown as 100 on the date of the rate hike.

US interest rates could continue to stay low


It is not unprecedented for interest rates to stay low for long periods of time. There have been many times throughout history when rates stayed below 3% for many years.


Sources: Federal Reserve Economic Data (FRED) US 10-year Treasury constant maturity, 1962 – 2016; Global Financial Data (GFD), 1919 – 1962; yields implied by GFD monthly price returns for 10-year US government bond, 1899 – 1919

US debt to GDP levels are approaching record highs


US debt to Gross Domestic Spending (GDP) levels in the US are approaching levels not seen since the 1940s. Some economists believe high levels of US debt to GDP could trigger high levels of inflation like it did in the 1940s.


Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period. | Source: usgovernmentspending.com

Annual inflation is below its historical average but rising


At the end of 2016, the US inflation rate was 2.1%—significantly higher than the 0.7% for year-end 2015 but still below its long-term average of 3%. Investors concerned about rising inflation should consider the benefits of owning inflation hedges that can help offset the damaging effects of inflation.


Source: Morningstar

Tax-equivalent yields


According to Standard & Poor’s bond rating methodology, AAA and AA bonds are considered high credit quality, and AA and BBB bonds have medium credit quality. Any bonds rated below BBB are considered below-investment-grade bonds. | Source: Bloomberg

Municipal bond yields look attractive


*Correlation is a statistical measure of how two investments move in relation to each other. A correlation of 1.0 indicates the investments have historically moved in the same direction; a correlation of -1.0 means the investments have historically moved in opposite directions; and a correlation of 0 indicates no historical relationship in the movement of the investments.
Tax-equivalent yields are based on 39.6% federal income tax rate. Past performance is not a guarantee of future results. The performance shown above is index performance and is not representative of any fund’s performance. This chart is for illustrative purposes. It does not reflect any particular investment. Investors cannot invest directly in an index. | Data Source: Bloomberg, 7/17.
1The municipal curve is populated with U.S. municipal general obligations with an average rating of AA+ for Moody’s and S&P.
2The Bloomberg Valuation Service (BVAL) curve is populated with U.S. dollar-denominated senior-unsecured fixed-rate bonds issued by domestic companies with a BBG rating of investment grade.
3The U.S. Treasury curve is comprised of U.S. dollar-denominated U.S. Treasury active securities.
4Municipal Bonds are represented by the Bloomberg Barclays Municipal Bond Index, which covers the U.S. dollar-denominated long term tax exempt bond market.
5The Bloomberg Barclays U.S. Aggregate Bond Index is an index comprised of government securities, mortgage-backed securities, asset-backed securities, and corporate securities to simulate the universe of bonds in the market.
6The Bloomberg Barclays U.S. Treasury Index is an unmanaged index of public obligations of the U.S. Treasury with a remaining maturity of one year or more.
7Bloomberg Barclays Global Aggregate ex-USD Bond Index provides a broad-based measure of the international investment-grade bond market hedged against the U.S. dollar.

The drug revolution unfolds


We’re seeing more drug approvals today than at any other period in history as scientists increasingly learn how to apply knowledge gained from mapping the human genome.


1The term “drug mechanism” refers to a specific way of manipulating disease pathobiology such that the disease manifestations are mitigated. A mechanism is "innovative" if that particular approach has not yet been exploited by a commercially-available drug for a particular disease state. The term "innovative drug launch" thus refers to the first U.S. commercial approval for a particular disease state of a drug with a mechanism of action that has not previously been brought to bear on that disease state. Should a second drug come to market with the identical mechanism of action directed at the identical disease state, it would not be considered "innovative." However, a drug with a known mechanism that is developed in a new way, to treat a different disease state, is considered "innovative". Each data point is a rolling 10 year count of the number of innovative drugs approved. A 10 year rolling count is used as the drug cycle (from identification of a drug candidate in research to FDA approval). Actual approvals might vary from expectations, perhaps significantly. | Data Sources: Credit Suisse and Wellington Management

Healthcare is trading at a discount to its historical average


In 2009 and early 2010, the healthcare sector traded at near historical lows relative to the S&P 500 Index. Exciting drug pipelines and greater clarity about the shape of healthcare reform led to recovery. After the recent selloff, the sector is once again trading at a discount.


Price-to-earning ratio is the ratio of a stock’s price to its earnings per share. | Source: Factset, 7/17

Fund flows


TOP: Data includes flows through December 2016 and excludes ETFs. BOTTOM: Data includes flow through November 2016 and excludes ETFs.
ICI data subject to periodic revisions. World equity flows are inclusive of emerging market, global equity and regional equity flows.
Hybrid flows include asset allocation, balanced fund, flexible portfolio and mixed income flows.
Data as of 3/31/17. | Source: Investment Company Institute.

YTD performance: Reflationary trade in doubt

Global synchronized expansion

Where’s the tapering?

Japan’s consumer recovers

Japan’s manufacturing cycle is improving

Japanese equities may depend less on the yen

Japan’s unloved equity market

European consumer confidence implies stronger retail sales

Leading business indicators turn positive in Europe

Earnings upside for European companies

Tighter financial conditions in China

Chinese consumer is emerging

Emerging economies’ current accounts have improved

Small business optimism has notched down but is still elevated

Capital expenditures (capex) intentions leading capex spending

Key US political dates drive action

Tight labor markets leading to higher wages

Market well below Fed’s rate expectations

Higher short-term rates help bank margins

USD strength supported by monetary policy divergence

The feedback loop of oil prices and production

Regional equity valuations are expensive except in Japan

Low-volatility equities are expensive

Valuations are expensive across most asset classes

Peak defaults probably behind us

Bank loan valuations look attractive

High yield outperformance makes EM debt attractive

Think Function, Not Form: Consider diversifying exposure across economic environments

Buying stocks when fear runs high has historically led to long-term gains

Intra-year dips in the S&P 500 Index happen frequently

Are you an opportunistic or apprehensive investor?

The cyclical nature of active and passive investing

Are value stocks poised to outperform growth stocks after a long period of underperformance?

Are international stocks poised to outperform US stocks after a long period of underperformance?

Growth is gaining momentum outside the US

Stock market returns after significant oil price declines

Asset class returns vs. the average investor

Duration risk is rising: Are you prepared?

Hypothetical impact of rising rates on fixed income

Some asset classes have performed well in rising-rate periods

US stock reactions to fast vs. slow rate hikes

US interest rates could continue to stay low

US debt to GDP levels are approaching record highs

Annual inflation is below its historical average but rising

Tax-equivalent yields

Municipal bond yields look attractive

The drug revolution unfolds

Healthcare is trading at a discount to its historical average

Fund flows

Implementation Ideas

If you agree with the economic views below, visit the fund detail pages to learn more about Hartford Funds ideas.


ECONOMIC VIEWS HARTFORD FUNDS IDEAS
Developed Market Equities
US:


Small business confidence remains high

Employment gains continue to buoy the consumer

Favor pro-cyclical sectors such as consumer discretionary and technology, and interest-rate sensitive sectors such as financials
Developed Market Equities
Japan and Europe:


Bullish on Japanese equities: Japan is unloved and the cheapest developed market

Moderately bullish on European equities where leading indicators have turned positive
Emerging Markets:

The outlook for both emerging market equities and debt is improving
Fixed Income:

The Fed may raise interest rates gradually

Bank loans valuations look attractive

Municipal bonds can offer attractive after-tax yields
ECONOMIC VIEW:
Developed Market Equities US:
Small business confidence remains high

Employment gains continue to buoy the consumer

Favor pro-cyclical sectors such as consumer discretionary and technology, and interest-rate sensitive sectors such as financials
ECONOMIC VIEW:
Developed Market Equities Japan and Europe:
Bullish on Japanese equities: Japan is unloved and the cheapest developed market

Moderately bullish on European equities where leading indicators have turned positive
ECONOMIC VIEW:
Emerging Markets:
The outlook for both emerging market equities and debt is improving
ECONOMIC VIEW:
Fixed Income:
The Fed may raise interest rates gradually

Bank loans valuations look attractive

Municipal bonds can offer attractive after-tax yields

Order

Financial Advisors: Order a Charts That Got Us Thinking flipbook that you can use in client meetings.



View Nanette's Monthly Commentary » Subscribe to Charts That Got Us Thinking »

Bloomberg Barclays Global Aggregate Bond Index provides a broad-based measure of the global investment-grade fixed-rate debt markets.
Bloomberg Barclays US High Yield Corporate Bond Index is an unmanaged broad-based market-value weighted index that tracks the total return performance of non-investment grade, fixed-rate publicly placed, dollar-denominated and nonconvertible debt registered with the Securities and Exchange Commission.
Bloomberg Barclays Global Aggregate Bond Index provides a broad-based measure of the global investment-grade fixed-rate debt markets.
JP Morgan Emerging Markets Bond Index is a broad-based, unmanaged index which tracks total return for external currency denominated debt (Brady bonds, loans, Eurobonds and U.S. dollar-denominated local market instruments) in emerging markets.
MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI Emerging Markets Index consists of 21 emerging market country indices.
MSCI Japan Index is a free-float adjusted market-capitalization index designed to measure large- and mid-cap Japanese equity market performance.
MSCI Japan Financials Index is a free float-weighted equity index. It was developed with a base value of 100 as of December 31, 1998.
MSCI USA Consumer Staples Index is designed to capture the large and mid cap segments of the US equity universe. All securities in the index are classified in the Consumer Staples sector as per the Global Industry Classification Standard (GICS®).
MSCI Europe Index is a free-float adjusted market-capitalization-weighted index designed to measure the equity market performance of the developed markets in Europe: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.
MSCI Europe Financials Index captures large and mid cap representation across 15 Developed Markets (DM) countries in Europe*. All securities in the index are classified in the Financials sector as per the Global Industry Classification Standard (GICS®).
MSCI USA Financials Index is designed to measure the performance of the large and mid cap segments of the US equity universe. All securities in the index are classified in the Financials sector in the Global Industry Classification Standard (GICS®).
MSCI USA Energy Index is designed to capture the large and mid cap segments of the US equity universe. All securities in the index are classified in the Energy sector in the Global Industry Classification Standard (GICS®); USD (trade weighted) is a proxy for the US dollar.
MSCI USA Financials Index is designed to measure the performance of the large and mid cap segments of the US equity universe. All securities in the index are classified in the Financials sector as per the Global Industry Classification Standard.
MSCI USA Index is designed to measure the performance of the large and mid cap segments of the US market. With 627 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in the US.
MSCI USA Industrials Index is designed to the capture large and mid cap segments of the US equity universe. All securities in the index are classified in the Industrials sector as per the Global Industry Classification Standard (GICS®).
MSCI USA Utilities Index is designed to capture the large and mid cap segments of the US equity universe. All securities in the index are classified in the Utilities sector as per the Global Industry Classification Standard (GICS®).
Nikkei 225 Index, commonly known as the Nikkei Index, is a price-weighted index for Tokyo Stock Exchange.
S&P/GSCI Industrial Metals Index provides investors with a reliable and publicly available benchmark for investment performance in the industrial metals market.

The implementation ideas discussed here reflect the views of Hartford Funds as of June 30, 2017 and are subject to change without notice. These views are not intended to be a prediction of future events or a guarantee of future results. This material should not be considered investment advice or a recommendation to buy, hold, or sell any security.

All investments are subject to risk, including the possible loss of principal. Foreign investments can be riskier than U.S. investments due to the adverse effects of currency exchange rates, differences in market structure and liquidity, as well as political and economic developments in foreign countries and regions. These risks are generally greater for investments in emerging markets. Risks of focusing investments on the health-care sector include regulatory and legal developments, patent considerations, intense competitive pressures, rapid technological changes, potential product obsolescence, and liquidity risk. Investments in the commodities market and the natural-resource sector may increase liquidity risk, volatility and risk of loss if there are adverse economic consequences in these sectors.

Fixed Income risks include credit, liquidity, call, duration, and interest-rate risk. As interest rates rise, bond prices generally fall; these risks are currently heightened due to the historically low interest rate environment. Investments in high-yield (“junk”) bonds involve greater risk of price volatility, illiquidity, and default than higher-rated debt securities. Bank loans can be difficult to value and highly illiquid; they are subject to credit risk and risks of bankruptcy and insolvency. Mortgage and asset-backed securities’ risks include credit, interest-rate, prepayment, and extension risk. Municipal securities may be adversely impacted by state/local, political, economic, or market conditions. Investors may be subject to the federal Alternative Minimum Tax as well as state and local income taxes. Capital gains, if any, are taxable. The value of inflation-protected securities generally fluctuates with changes in real interest rates, and the market for these securities may be less developed or liquid, and more volatile, than other securities markets. U.S. Treasury securities are backed by the full faith and credit of the U.S. government as to the timely payment of principal and interest. Privately placed, restricted (Rule 144A) securities may be more difficult to sell and value than publicly traded securities, thus they may be potentially illiquid.

The views expressed here are those of Nanette Abuhoff Jacobson. 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.

The Floating Rate Fund and the Floating Rate High Income Fund should not be considered an alternative to CDs or money market funds. This Fund is for investors who are looking to complement their traditional fixed-income investments.

Investors should carefully consider a fund’s investment objectives, risks, charges and expenses. This and other important information is contained in the fund’s prospectus and summary prospectus (if available), which can be obtained by visiting hartfordfunds.com. Please read it carefully before investing.

Mutual funds are distributed by Hartford Funds Distributors, LLC (HFD), Member FINRA. Hartford Funds Management Company, LLC (HFMC) is the mutual funds’ investment manager. Certain funds are sub-advised by Wellington Management Company LLP or Schroder Investment Management North America Inc. Schroder Investment Management North America Ltd. serves as a secondary sub-adviser to certain funds. HFD and HFMC are not affiliated with any fund sub-adviser.

07/17 NAJ_FLP_0717 202430