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Charts That Got Us Thinking

2020 Outlook: Optimism With a Pinch of Realism

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Multi-asset Views


Nanette Abuhoff Jacobson raised her outlook for international equities and emerging market equities, and she lowered her outlook for government bonds and investment-grade credit. She’s moderately bearish on commodities because she doesn’t see inflation as an imminent threat.

Nanette is a managing director and multi-asset strategist at Wellington Management and Global Investment Strategist for Hartford Funds.


As of December 2019 | Source: Wellington Management.

Multi-asset Views

Multi-asset outlook process


Nanette puts the least weight on valuations in her multi-asset outlook process. This is especially true for equities because it could take years rather than months for equity valuations to revert to the mean.


As of December 2019. | Source: Wellington Management.

Multi-asset Views

2019 Report Card


Nanette anticipated that markets would be in a tug-of-war between weaker global growth and policy easing, so she recommended positioning defensively without abandoning risk. That worked until Q4 when equities outpaced credit. She was correct that US equities would outperform international equities.


December 2019 | Source: Wellington Management.

Multi-asset Views

Has rotation into risk assets begun?
YTD through 30 Sep 2019 and 4Q 2019 performance


While year-end total returns suggest a risk-on year, underneath the surface, one can see the shift from safety in Q1-Q3 to risk-seeking in Q4.


Risk assets (such as equities, commodities, high-yield bonds, real estate, and currencies) have a significant degree of price volatility.
1January 1, 2019–September 30, 2019. | 2October 1, 2019–December 11, 2019. | All returns in local currency unless otherwise stated. Currency returns are versus the USD. | Past performance does not guarantee future results. The performance shown is index performance and not representative of a fund’s performance. Indices are unmanaged and not available for direct investment. | Sources: Bloomberg, Wellington Management. | Please see representative index definitions below.

Global Fundamentals

Past declines in interest rates should help economies in 2020


Lower German bond yields (scale inverted) have historically resulted in manufacturing strength after 12-18 months. This suggests that the manufacturing recession may abate.


1Purchasing Managers Index (PMI) is an indicator of the economic health of the manufacturing sector. A reading above 50 signals economic expansion; below 50 signals contraction. | Past performance does not guarantee future results. | Sources: Bloomberg, Wellington Management | Chart data: December 1998 – November 2019. Eurozone manufacturing PMI data is lagged 18 months and is from June 2000 to November 2019. German bund 10-year yield data is from December 1998–October 2019.

Global Fundamentals

Stronger Chinese credit could help global economy


Stronger Chinese credit indicates more Chinese businesses are borrowing to invest, and Chinese individuals are borrowing to spend. Both of these should lead to stronger global growth.


1Credit impulse: the change in new credit issued as % of GDP. | Sources: Bloomberg, Wellington Management | Chart data: March 2009–November 2019. X-axis scale range is December 2009 to July 2020 due to China credit impulse data being forwarded 9 months. China credit impulse data is from March 2009 to October 2019. Global manufacturing PMI data is from December 2009 to November 2019.

Global Fundamentals

Where’s the love?
Cash and fixed income absorb equity outflows


Cash levels are still relatively high given more competitive yields and a sense of fear that has persisted since the financial crisis. Equities could benefit if investors become less defensive.


Fixed income is a type of investing or budgeting style for which real return rates or periodic income is received at regular intervals and at reasonably predictable levels. | Note: All asset class flows made up of both ETFs and non-ETFs (> 99% non-ETF for MM), institutional and retail, and domestic and international. Past performance does not guarantee future results. | Source: EPFR | Chart data: January 3, 2018–December 11, 2019.

Global Fundamentals

Previous 15–25% declines have led to strong rallies


Past declines of 15-25% have historically resulted in strong subsequent rallies. This holds true for the rally that followed the selloff in the fourth quarter of 2018.


Past performance does not guarantee future results. Indices are unmanaged and not available for direct investment. | As of November 30, 2019. Source Bloomberg.

Global Fundamentals

Value stocks primed for recovery?


Value stocks have underperformed growth stocks for 10 years. Two catalysts for value stocks performing better are the de-escalation of trade tensions and attractive valuations.


Past performance does not guarantee future results. Indices are unmanaged and not available for direct investment. | Shaded areas represent NBER US recessions. | Sources: Bloomberg, NBER. | Chart data: September 1988–November 2019. Please see representative index definitions below.

Global Fundamentals

Protectionism likely to persist


While it seems that the first phase of the US-China trade deal is settled, some degree of protectionism is likely here to stay given the American public’s support for a tough stance toward China.


Replies of “Don’t know/no opinion” have been excluded. As a result, “Fair” and “Unfair” responses will not sum to 100%. | Source: https://news.gallup. com/poll/236843/americans-say-china-trade-unfair-trade-canada-fair.aspx | Poll conducted June 18–24, 2018. Question: For the following countries, please tell me if you believe each has a fair trade policy or an unfair trade policy with the United States.

Global Fundamentals

Can Trump afford to pursue trade war?


Since 2020 is an election year, President Trump will want to de-escalate the trade war, especially since the economy is an area where he enjoys strong approval.


*Percentage approval rating differential between approval/disapproval as measured via Real Clear Politics survey amalgamations. | Source: Real Clear Politics.

Global Fundamentals

Will swing states turn on Trump?
2016 US election and Trump’s current net approval rating


On a state level, polls suggest that most swing states (outlined in yellow) give President Trump a net negative approval rating. This is further motivation for him to de-escalate trade tensions.


Shading represents the net percentage of votes won in each state in the 2016 presidential election. The numbers represent net approval ratings for President Trump as of November 2019. | Thick yellow outlines indicate swing states. According to Politico, these states were “selected after weighing a variety of factors including polling, demography, voter registration, early ad spending, campaign staffing, and recent and past electoral history.” Most of the states have been characterized as swing states in most of the recent elections, with the exception of Michigan and Pennsylvania, neither of which had voted red since 1988. The reason for categorizing them as swing states was largely Trump-specific. | Sources: Net approval: https://morningconsult.com/tracking-trump-2/; election results: https://www.nytimes.com/elections/2016/results/president

Global Fundamentals

Less policy uncertainty could help risky assets


Higher policy uncertainty (inverted scale) tends to be associated with worse returns for risk assets (as represented by MSCI ACWI Index). Even with a Phase 1 trade deal, uncertainty could decline and non-US equities could get a lift.


1The Global Policy Uncertainty Index is a GDP-weighted average of national economic policy uncertainty indices for 20 countries. | Past performance does not guarantee future results. Indices are unmanaged and not available for direct investment. | Sources: Bloomberg, Global Economic Policy Uncertainty Index (https://www.policyuncertainty.com/global_monthly.html) | Chart data: January 1998–November 2019 (Global Policy Uncertainty through October 2019, MSCI ACWI through November 2019). | Please see representative index definitions below.

Regional Equities

Looser financial conditions suggest a stronger US economy


One reason to still be positive on the US is that lower interest rates historically benefit the economy with a lag of 12-18 months.


Sources: Bloomberg, Wellington Management. | Chart data: November 1991–November 2019. X-axis scale range is May 1993 to May 2021 due to 10-year yield being forwarded 18 months. Ten-year yield data is from November 1991 to November 2019. PMI data is from May 1993–November 2019.

Regional Equities

Trade uncertainty weighs on US businesses


Another reason to still be positive on the US is better prospects for the manufacturing sector.


1The US Trade Policy Uncertainty Index reflects the frequency of articles in American newspapers that discuss policy-related economic uncertainty and also contain one or more references to trade policy. | Sources: Baker, Bloom & Davis, Institute for Supply Management, Bloomberg. | Chart data: December 1995–November 2019.

Regional Equities

A weaker dollar usually propels industrials


If risk appetite holds up, the US dollar is likely to weaken. This would be a tailwind for industrials.


Sources: Bloomberg, Wellington Management. | Chart data: January 2004–November 2019. X-axis scale range is January 2004 to May 2020 due to trade-weighted US$ being forwarded 6 months. Trade-weighted US$ data is from June 2004 to November 2019. Industrial sector/market relative performance data is from January 2004–November 2019.

Regional Equities

European green shoots appearing


Easier financial conditions brought about by lower rates and looser monetary policy should translate into the stabilization of European manufacturing.


1M1 is the portion of the money supply that’s considered the most liquid and includes physical currency, travelers checks, and other checkable deposits. | Source: Bloomberg. | Chart data: July 1998 – November 2019. X-axis scale range is December 1998 to April 2020 due to M1 being forwarded 6 months. M1 data is from July 1998 to October 2019. PMI data is from December 1998–November 2019.

Regional Equities

European consumers still in decent shape


Improving employment and rising incomes are supporting European consumers. These reasons, along with a bottoming in manufacturing, improve the outlook for European equities.


Sources: Bloomberg, Wellington Management. | Chart data: March 2000–June 2019.

Regional Equities

Stronger global manufacturing should help Nikkei


A rise in global manufacturing has typically led to Japanese equity gains.


1Japan’s Nikkei 225 Index is a price-weighted index comprised of Japan’s top 225 blue-chip companies on the Tokyo Stock Exchange. | Past performance does not guarantee future results. Indices are unmanaged and not available for direct investment. | Sources: Bloomberg, Wellington Management. | Chart data: November 1999–November 2019.

Regional Equities

Japan has never hiked the VAT into a weakening economy


While past hikes in the value-added tax (VAT) have occurred with an improving economy, the Japanese government’s VAT increase in October coincides with a weaker economy.


1The OECD system of Composite Leading Indicators is designed to provide early signals of turning points in business cycles. | VAT tax introduced April 1, 1989 at 3%, increased to 5% April 1, 1997, increased to 8% October 1, 2014, increased to 10% October 1, 2019. | Sources: Bloomberg, Wellington Management. | Chart data: November 1980–September 2019.

Regional Equities

Chinese economy shifting from “heavy” to “light” industries


China is important because it makes up 1/3 of the MSCI Emerging Markets Index. China could see a continued shift in its enormous economy away from manufacturing and toward services, which is already more than 50% of economic output.


Source: Haver Analytics. | Chart data: 2004–2018.

Regional Equities

Valuations relatively attractive outside US


US equities are most expensive, while international and EM are the cheapest.


1Price-to-book is the ratio of a stock’s price to its book value per share. | 2Shiller P/E ratio is a valuation measure, generally applied to broad equity indices, that uses real per-share earnings over a 10-year period. | As of November 29, 2019. | Sources: MSCI, Datastream, Wellington Management.

Credit

Fixed income continues to play diversification role


While bonds face a more challenging environment without Fed easing, it’s still prudent to use bonds for diversification since the correlation between stocks and bonds is negative.


Blue-shaded areas represent US tightening cycles; gray-shaded areas represent US easing cycles. Past performance does not guarantee future results. Indices are unmanaged and not available for direct investment. | Source: Datastream. | Chart data: June 1988–November 2019. | Please see representative index definitions below.

Credit

Value in high yield


Triple-C rated bonds underperformed double-B rated bonds by a wide margin last year. This is very unusual for a spread tightening year. Nanette sees opportunity in triple-C rated companies that have good business models and positive cash flows.


1An OAS (Option-Adjusted Spread) is a measurement tool for evaluating yield differences between similar-maturity fixed-income products with different embedded options. | 2A basis point is a unit that 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. | Source: Bloomberg Barclays. | Chart data: March 1994–November 2019.

Credit

Benign default environment


Defaults are still low at around 3%. Even if defaults increased to 4%, they would still be at a historically low level.


Actual results may vary, perhaps significantly, from the estimated data presented. | Source: Moody’s. | Chart data: actual December 1996–October 2019, estimated November 2019–October 2020.

Credit

Securitized credit can tap into healthy consumer


Securitized assets that tap into the strength of US consumers and housing are an attractive alternative to investment-grade corporates bonds. Securitized assets are more diversified than single-name credits and also offer a spread advantage.


1Spreads are the difference in yields between two fixed-income securities with the same maturity, but originating from different investment sectors. | As of December 13, 2019. | Agency Credit Risk Transfer securities are non-agency residential mortgage-backed securities. Freddie K B’s are non-agency commercial mortgage-backed securities (multi-family). | For illustrative purposes only. | Sources: Bloomberg, Wellington Management.

Credit

Credit spreads are on the tight side


Credit spreads are currently richly valued.


Sources: Barclays, Wellington Management.

Risks

Shift towards populism in US and around the world


Populism is a global phenomenon. In the US, one flavor of populism is the progressive Democrat agenda, which may not be market friendly.


Sources: Haver Analytics, Wellington Management. | Chart data: 1968–2018.

Portfolio Construction

Consider diversifying exposure across economic environments


It’s important to consider the risk cases in the instance that your base case doesn’t work. Be sure to have some exposure to rising inflation and weaker growth economic scenarios.


Diversification does not ensure a profit or protect against a loss in a declining market.
EMD: Emerging Markets Debt
REITs: Real Estate Investment Trust
TIPS: Treasury Inflation Protected Securities
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 Global Multi-Asset StrategiesSM team 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


*This column shows the S&P 500 Index’s one-day loss on the date shown in column 1.
Past performance does not guarantee future results. Assumes reinvestment of capital gains and dividends and no taxes.
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.
Data Sources: Morningstar and Hartford Funds, 1/20

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


Past performance does not guarantee future results. Indices are unmanaged and not available for direct investment. Assumes reinvestment of capital gains and dividends and no taxes. Drawdown refers to the largest market drop from peak to trough during the calendar year. | Data Sources: Morningstar and Hartford Funds, 1/20

Intra-year dips in emerging-market equities happen frequently


Past performance does not guarantee future results. Indices are unmanaged and not available for direct investment. Assumes reinvestment of capital gains and dividends and no taxes. Drawdown refers to the largest market drop from peak to trough during the calendar year. | Data Sources: Morningstar and Hartford Funds, 1/20

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 does not guarantee future results. Indices are unmanaged and not available for direct investment. Assumes reinvestment of capital gains and dividends and no taxes. | Data Sources: Thomson Reuters and Hartford Funds, 1/20.

The cyclical nature of active and passive investing


While passive large-blend funds have performed well in recent years, a longer-term view shows that active and passive large-blend funds have routinely traded periods of outperformance.


Performance for the Morningstar Large Blend Category is net of fees. “Actively Managed Large Blend” is made up of funds from the Morningstar Large Blend category that are not index or enhanced index funds. “Passively Managed Large Blend” is represented by the Morningstar S&P 500 Tracking Category.
Past performance does not guarantee future results. Indices are unmanaged and not available for direct investment. | Data Sources: Morningstar and Hartford Funds, 1/20

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 February 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 does not guarantee future results. Indices are unmanaged and not available for direct investment. For illustrative purposes only. | Data Sources: Morningstar and Hartford Funds, 1/20 | Please see representative index definitions below.

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 7.5 years. US equities have outperformed international equities over the past 8.8 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 does not guarantee future results. Indices are unmanaged and not available for direct investment. For illustrative purposes only. | Data Sources: Morningstar and Hartford Funds, 1/20. | Please see representative index definitions below.

Dividends’ Contribution to Total Return Varies By Decade


For a deeper dive on dividend-paying stocks, you can read "The Power of Dividends" white paper on hartfordfunds.com.


Data Sources: Morningstar and Hartford Funds, 1/19. *Total Return for the S&P 500 Index was negative for the 2000s. Dividends provided a 1.8% annualized return over the decade. Most recent data available. | Past performance does not guarantee future results. The graph shown is for illustrative purposes only.

Dividend-paying stocks have significantly outperformed dividend non-payers in the long run


Companies that grew or initiated a dividend have historically enjoyed a significant performance advantage.


Past performance does not guarantee future results. Indices are unmanaged and not available for direct investment. For illustrative purposes only. The graph is not representative of any Hartford Fund’s performance, and does not take into account fees and charges associated with actual investments.
Dividend Growers & Initiators - Grew or initiated a dividend in the past 12 months | Dividend Payers - Paid a dividend in the past 12 months | No Change - Maintained their dividend level in the past 12 months | Dividend Non-Payers - Did not pay a dividend in the past 12 months | Dividend Cutters & Eliminators - Lowered or eliminated their dividends in the past 12 months | Source: Ned Davis Research, 1/20.

Timing the market is impossible


If you missed some of the market’s best months over the past 30 years, you would have been better off buying lower-risk Treasury Bills.


Past performance does not guarantee future results. Indices are unmanaged and not available for direct investment. For illustrative purposes only. Data Sources: Ned Davis Research and Hartford Funds, 1/20.

Asset class returns vs. the average investor


According to a study by Dalbar, the average investor has underperformed both equity and bond indices by buying and selling at the wrong time.


Performance data for indices represents a lump sum investment in January 1999 to December 2018 with no withdrawals. US Equities are represented by the S&P 500 Index. US Bonds are represented by the Bloomberg Barclays US Aggregate Bond Index. Indices are unmanaged, unavailable for direct investment, and do not reflect fees, expenses, or sales charges. | Unmanaged index returns do not reflect any fees, expenses, or sales charges. Index performance is not indicative of any Hartford fund.
See Index Definitions below for descriptions.
Average equity investor and average bond investor performance results are calculated using data supplied by the Investment Company Institute. Investor returns are represented by the change in total mutual fund assets after excluding sales, redemptions and exchanges. This method of calculation captures realized and unrealized capital gains, dividends, interest, trading costs, sales charges, fees, expenses and any other costs. After calculating investor returns in dollar terms, two percentages are calculated for the period examined: Total investor return rate and annualized investor return rate. Total investor return rate is determined by calculating the investor return dollars as a percentage of the net of the sales, redemptions, and exchanges for each period.
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 Barclays Index Products to compare mutual fund investor returns to an appropriate set of benchmarks. Covering the period from January 1, 1999, to December 31, 2018, 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.

Are you prepared for duration risk?


In June of 2017, 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.


Duration is a measure of price sensitivity to interest rate changes. | Data Sources: Barclays Live, Bloomberg, and Hartford Funds, 1/20. For illustrative purposes only.

Hypothetical impact of rising rates on fixed income


Past performance does not guarantee future results. Indices are unmanaged and not available for direct investment. For illustrative purposes only.
Fixed-income sectors shown above are provided by Barclays and are represented by the following Bloomberg Barclays indices – Broad Market: US Aggregate Bond; Mortgage-backed securities: US MBS Fixed-Rate; Investment Grade Corporates: US Corporate Bond; Municipals: Municipal Bond 10-year; High Yield: US High Yield Corporate Bond; Floating Rate Notes: US FRN (BBB); Convertibles: US Convertible Liquid Bond; Asset-backed securities: Fixed-Rate Asset-Backed Securities (ABS); CMBS: US CMBS. Please see representative index definitions below. Change in price is calculated as New Price = (Price + (Price * -Duration* Change in Interest Rates))+(0.5 * Price * Convexity * (Change in Interest Rates)^2) | Data Sources: Bloomberg and Hartford Funds, 1/20.

Tax-equivalent yields


1The tax-equivalent yield is the pretax yield that a taxable bond needs to possess for its yield to be equal to that of a tax-free municipal bond. | Data Sources: Bloomberg and Hartford Funds, 1/20.

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 37% federal income tax rate. Past performance does not guarantee future results. Indices are unmanaged and not available for direct investment.
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.
Data Sources: Bloomberg and Hartford Funds, 1/20.

Multi-sector credit shows characteristics of a defensive-equity alternative


A multi-sector credit approach that equally blends high-yield bonds, bank loans, and EM debt has historically provided equitylike returns with significantly less volatility than equities.


1MSC Blend is comprised of 1/3 BofA Merrill Lynch Global High Yield Constrained, 1/3 Credit Suisse Leveraged Loan Index, and 1/3 JPMorgan Emerging Markets Bond Index Plus. Past and hypothetical performance do not guarantee future results and an investment can lose value. The MSC Blend and its performance are hypothetical and not representative of an actual fund. Simulated performance is developed with the benefit of hindsight (i.e., actual knowledge of market conditions and the results of similar strategies) and thus has inherent limitations. Results are presented gross of fees; if fees were applied, returns would have been lower. | Sharpe Ratio is a measure of the excess fund return per unit of risk, as measured by standard deviation. | Sources: Bank of America Merrill Lynch, Credit Suisse, JPMorgan, MSCI, and Wellington Management. | Please see representative index definitions below.

Fund flows


TOP: Data includes flows through 11/19 and excludes ETFs. | BOTTOM: Data includes flows through 11/19 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 Sources: Investment Company Institute and Hartford Funds, 1/20.

Multi-asset views

Multi-asset outlook process

2019 Report Card

Has rotation into risk assets begun?

Past declines in interest rates should help economies in 2020

Stronger Chinese credit could help global economy

Where's the love?

Previous 15–25% declines have led to strong rallies

Upside risk: Value stocks primed for recovery?

Protectionism likely to persist

Can Trump afford to pursue trade war?

Will swing states turn on Trump?

Less policy uncertainty could help risky assets

Looser financial conditions suggest a stronger US economy

Trade uncertainty weighs on US businesses

A weaker dollar usually propels industrials

European green shoots appearing

European consumers still in decent shape

Stronger global manufacturing should help Nikkei

Japan has never hiked the VAT into a weakening economy

Chinese economy shifting from "heavy" to "light" industries

Valuations relatively attractive outside US

Fixed income continues to play diversification role

Value in high yield

Benign default environment

Securitized credit can tap into healthy consumer

Credit spreads are on the tight side

Shift towards populism in US and around the world

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

Intra-year dips in emerging-market equities 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?

Dividends’ Contribution to Total Return Varies By Decade

Dividend-paying stocks have significantly outperformed dividend non-payers in the long run

Timing the market is impossible

Asset class returns vs. the average investor

Are you prepared for duration risk?

Hypothetical impact of rising rates on fixed income

Tax-equivalent yields

Municipal bond yields look attractive

Multi-sector credit shows characteristics of a defensive-equity alternative

Fund flows

Bloomberg Barclays Municipal Bond 10-year Index is a sub-index of the Barclays Municipal Bond Index. It is a rules-based market value-weighted index of bonds with maturities of 10 years engineered for the tax-exempt bond market.
Bloomberg Barclays US 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.
Bloomberg Barclays US CMBS Index measures the market of conduit and fusion Commercial Mortgage-Backed Securities deals with a minimum current deal size of $300 million.
Bloomberg Barclays US Convertible Liquid Bond Index tracks US convertible securities, such as convertible bonds.
Bloomberg Barclays US Corporate Bond Index measures the investment grade, fixed-rate, taxable corporate bond market.
Bloomberg Barclays US Fixed-Rate Asset-Backed Securities (ABS) Index covers fixed-rate ABS with the following collateral types: credit cards, autos, home equity loans and stranded-cost utility (rate reduction bonds).
Bloomberg Barclays US FRN (BBB) is a subset of the US Floating-Rate Note (FRN) Index, which measures the performance of USD denominated, investment-grade, floating-rate notes across corporate and government-related sector.
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 US Long Treasury Index measures US dollar-denominated, fixed-rate, nominal debt issued by the US Treasury. Treasury bills are excluded by the maturity constraint, but are part of a separate Short Treasury Index.
Bloomberg Barclays US MBS Fixed-Rate Index measures the performance of investment grade fixed-rate mortgage-backed pass-through securities of Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC).
Credit Suisse Leveraged Loan Index is an unmanaged, trader-priced index that tracks leveraged loans.
ICE BofAML US Corporate Master Index tracks the performance of US dollar-denominated investment-grade rated corporate debt publicly issued in the US domestic market.
ICE BofAML US High Yield Index tracks the performance of US dollar-denominated below-investment- grade rated corporate debt publicly issued in the US domestic market.
ICE BofAML Global High Yield Constrained Index tracks the performance of below-investment grade corporate debt denominated in US dollars, Canadian dollars, pounds and euros that are publicly issued in the major US or Eurobond markets.
ICE BofAML US Treasury 7 – 10 Year Index tracks the performance of US dollar-denominated below-investment-grade rated corporate debt publicly issued in the US domestic market.
J.P. Morgan Emerging Markets Bond Index Plus is a market capitalization-weighted index based on bonds in emerging markets.
MSCI ACWI Index is a free float-adjusted market capitalization index that measures equity market performance in the global developed and emerging markets, consisting of developed and emerging market country indices.
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 Europe Index is a free-float adjusted market-capitalization-weighted index designed to measure the equity market performance of the developed markets in Europe.
MSCI Japan Index is a free-float adjusted market-capitalization index designed to measure large- and mid-cap Japanese equity market performance.
MSCI USA Consumer Staples Index is designed to capture the large- and mid-cap segments of the US equity universe that are classified in the consumer staples sector.
MSCI USA Discretionary Index is designed to capture the large- and mid-cap segments of the US equity universe that are classified in the consumer discretionary sector.
MSCI USA Energy Index is designed to capture the large- and mid-cap segments of the US equity universe that are classified in the energy sector.
MSCI USA Financials Index is designed to measure the performance of the large- and mid-cap segments of the US equity universe that are classified in the financials sector.
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 Info Tech Index is designed to capture the large and mid cap segments of the US equity universe that are classified in the information technology sector.
MSCI USA Utilities Index is designed to capture the large and mid cap segments of the US equity universe that are classified in the utilities sector.
MSCI World Index captures large and mid cap representation across Developed Markets countries.
MSCI World ex USA Index is a free float-adjusted market capitalization index that captures large and mid cap representation across developed markets countries excluding the United States.
Russell 1000 Growth Index tracks the performance of large- and mid-capitalization U.S. equities that exhibit growth characteristics.
Russell 1000 Value Index tracks the performance of large- and mid-capitalization U.S. equities that exhibit value characteristics.
S&P 500 Growth Index is a subset of the S&P 500 Index. It includes full market-capitalization weightings in the most growth-oriented third of the S&P 500 Index, and a half market-cap stake in the stocks within the S&P 500 Index that have both value and growth characteristics.
S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
S&P 500 Value Index is a subset of the S&P 500 Index. It includes full market-capitalization weightings in the most value-oriented third of the S&P 500 Index, and a half market-cap stake in the stocks within the S&P 500 Index that have both value and growth characteristics.

 

The Hartford Funds Ideas discussed here reflect the views of Hartford Funds as of December 31, 2019 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.

Important Risks: Investing involves risk, including the possible loss of principal. • Foreign investments may be more volatile and less liquid than U.S. investments and are subject to the risk of currency fluctuations and adverse political and economic developments. These risks may be greater for investments in emerging markets. • Fixed income security risks include credit, liquidity, call, duration, and interest-rate risk. • Investments in high-yield (“junk”) bonds involve greater risk of price volatility, illiquidity, and default than higher-rated debt securities. • 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. • Bank loans can be difficult to value and highly illiquid; they are also subject to nonpayment, collateral, bankruptcy, default, extension, prepayment and insolvency risks. • 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. • Commodities may be more volatile than investments in traditional securities. • Diversification does not ensure a profit or protect against a loss in a declining market.

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.

Additional Information About Index Providers:
Bloomberg Index Services Limited. 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.

Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling, computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI’s express written consent.

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