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Charts That Got Us Thinking

2Q 2019 Outlook: What's really changed?

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Multi-asset Views


Nanette Abuhoff Jacobson believes slower growth implies modest equity returns, but also less upward pressure on inflation and rates. Credit valuations look more attractive than the valuations for US equities. Emerging market (EM) equities can be used as a hedge against higher Chinese growth.

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


As of March 2019. | Source: Wellington Management

Multi-asset Views

Multi-asset outlook process


Nanette believes fundamentals, policy, and valuations drive markets on a 6-12 month time horizon. Valuations are a smaller input because they tend to work better over longer time horizons.


As of March 2019. | Source: Wellington Management.

Multi-asset Views

What's really changed?


Markets sold off in December as a result of slowing growth and a hawkish Federal Reserve (Fed). This year markets have rallied as the Fed has turned markedly more dovish, but global growth is slowing. Investors should consider being slightly more defensive in their portfolios.


1Through 3/25/2019. All returns are in local currency unless otherwise stated. | Past performance is not a guarantee of future results. Indices are unmanaged and not available for direct investment. | Please see representative index definitions below. | Sources: Bloomberg, Wellington Management.

Interest Rates

Fed expectations: From a hike to a cut?


Last November, the bond market was pricing in a nearly 100% chance of a Fed rate hike. By early this year, the market reversed course completely and is now pricing in a good chance of a rate cut and a zero chance of a rate hike!


Source: Bloomberg

Global Fundamentals

Global growth is deteriorating


Global PMI is falling, and M1 (i.e., money supply), a highly regarded 6-month leading indicator, suggests that further softness is ahead.


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.
2M1 is the money supply that includes physical currency and coin, demand deposits, travelers checks, other checkable deposits and negotiable order of withdrawal (NOW) accounts. Gross Domestic Product (GDP)-weighted M1 money supply includes US, Europe, Japan, and China.
Sources: Bloomberg, Markit, Wellington Management | Chart data: July 1997 – February 2019. X-axis scale range is January 1998 to August 2019 due to M1 being forwarded 6 months M1 data is from July 1997 to February 2019 (i.e., first data point for M1 represents July 1997 and final data point represents February 2019). PMI data is from January 1998 – February 2019

Global Fundamentals

Inflation leads have cooled


Because growth has slowed, it’s less likely that inflation will rise. Growth in this chart is forwarded by 18 months and has historically been a good leading indicator on the direction of inflation.


1Consumer Price Index (CPI) in the US is defined by the Bureau of Labor Statistics as a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
2Real gross domestic product (RGDP) is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year, expressed in base-year prices.
Sources: OECD, Haver, Wellington Management | Chart data: December 2001 – January 2019. X-axis scale range is June 2003 to June 2020 due to OECD RGDP data being forwarded 18 months. OECD RGDP data is from December 2001 to December 2018 (i.e., first data point for OECD RGDPI represents December 2001 and final data point represents December 2018). OECD CPI data is from June 2003 – January 2019.

Regional Equities

It’s time to consider rotating into quality and safety-oriented factors
Factor families: Results across the cycle


The risk-aversion factor family, which includes quality and safety factors, has historically outperformed during the late and slowdown phases of the business cycle.


Past performance is not a guarantee of future results. Indices are unmanaged and not available for direct investment. Each bar represents the average monthly excess return relative to the MSCI USA Index for factors within each family. Factor category definitions: Risk-seeking: Factors characterized by a wide range of expected outcomes (e.g., high EPS dispersion, high beta); Mean-reversion: Factors characterized by an expected convergence toward a mean value (e.g., low P/E ratio); Trend-following: Factors characterized by the expectation of a continuation of a trend (e.g., positive earnings revisions); Risk-aversion: Factors characterized by a narrow range of expected outcomes (e.g., low volatility) | For illustrative purposes only. | Please see representative index definitions below. | Sources: FactSet, FTSE, Wellington Management.

Regional Equities

US consumers are healthy


US consumers have slowed slightly but are still in fine shape.


University of Michigan Consumer Sentiment Index is a US consumer confidence index | Sources: Bloomberg | Chart data: December 1995 – March 2019 (US consumer sentiment through December 2018, US personal consumption through March 2019)

Regional Equities

For now, government is helping business


Federal regulations have slowed precipitously under President Trump, but they may increase if a Democratic presidential candidate with views that are further left than mainstream Democrats is elected president in 2020.


1Presidential year: 1 February – 31 January (i.e., 1994 represents 1 February 1993 – 31 January 1994). Significant regulations, as defined by Executive Order 12866, are those that may "create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive order." | Source: The George Washington University Regulatory Studies Center www.regulatorystudies.columbian.gwu.edu | Chart data: 1994 – 2017

Regional Equities

European consumers have softened


European consumer confidence and retail sales have slowed but are still at reasonable levels.


Sources: Haver, Wellington Management | Chart data: December 2000 – February 2019. X-axis scale range is March 2001 to May 2019 due to consumer confidence being forwarded 3 months. Consumer confidence data is from December 2000 to February 2019 (i.e.,first data point for consumer confidence represents December 2000 and final data point represents February 2019). Retail sales data is from March 2001 – January 2019

Regional Equities

Could falling European data find a bottom?


Two leading indicators of Europe’s PMI (the dark blue and light blue lines) both suggest further weakness ahead for Europe’s manufacturing cycle. However, both appear to have troughed, so the weakness may prove to be temporary.


*“ZEW” represents Zentrum für Europäische Wirtschaftsforschung and is a German economic research institute; “Ifo” is Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, which is an economic think-tank.
Past performance is not a guarantee of future results. | Source: Bloomberg | Chart data: October 2004 – March 2019. X-axis scale December 2004 – June 2019 due to ZEW EZ growth expectations being forwarded 3 months. ZEW EZ growth expectations data is from November 2004 – March 2019 (i.e., first data point for ZEW EZ growth expectations represents November 2004 and final data point represents March 2019. Ifo Pan Germany Business Expectations data (forwarded 2 months) is from October 2004 to March 2019. Markit EZ Manufacturing PMI data is from December 2004 – March 2019.

Regional Equities

Japan depends on the yen


Japan’s stock market and economy depend on the yen. When the yen weakens the stock market usually goes up (not shown), and the economy starts to outperform (shown on chart). Unfortunately, the yen is a safe-haven currency, so when growth slows, the yen tends to appreciate.


Past performance is not a guarantee of future results. Sources: Haver, Markit, Deutsche Bank, Wellington Management | Chart data: November 2006 – February 2019. X-axis scale range is May 2007 to August 2019 due to trade-weighted yen being forwarded 6 months. Trade-weighted yen data is from November 2006 to February 2019 (i.e., first data point for the trade-weighted yen represents November 2006 and final data point represents February 2019). Japan-global PMI data is from May 2007 – February 2019.

Regional Equities

Early signs of China turnaround


China’s M1 is a proxy for monetary stimulus and has been falling as President Xi pursues a deleveraging campaign to make the financial system less risky. There is a positive correlation between China’s M1 and the relative performance of EM equities relative to Developed Market (DM) equities. If China’s M1 inflects upward, then EM equities should outperform DM equities.


Past performance is not a guarantee of future results. Indices are unmanaged and not available for direct investment. Sources: Bloomberg, Wellington Management | Chart data: January 1996 – February 2019 | Please see representative index definitions below.

Regional Equities

Lower rates in China could lead to increased money supply


Chinese interest rates have declined (note that 5-year swaps are interest rates and the line is inverted and advanced 9 months). This should lead to higher M1, which would result in EM equities performing well.


Past performance is not a guarantee of future results. Sources: Bloomberg, Wellington Management | Chart data January 1996 – February 2019. X-axis scale range is January 1996 – November 2019 due to China 5Y swap being forwarded 9 months. China 5Y swap data: April 2006 – February 2019, (i.e., first data point for China 5Y swap represents April 2006 and final point represents February 2019); China M1: January 1996 – February 2019

Regional Equities

China matters more for equity indexes


A positive outlook on China can be expressed through an EM equity index (e.g., MSCI Emerging Markets Index) but not through an EM bond index (e.g., JP Morgan Government Bond Index-EM Global Diversified) because China doesn’t play a material role in that index.


1JPMorgan Government Bond Index – Emerging Market Global Diversified (GBI-EM-GD), as of 7 March 2019
2MSCI Emerging Markets Index, as of 28 February 2019
Please see representative index definitions below. | Sources: JPMorgan, MSCI

Regional Equities

Valuations relatively attractive outside US


Valuations are expensive in the US and cheaper elsewhere.


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 28 February 2019 | Sources: MSCI, Datastream, Wellington Management

Credit

Fixed income may resume diversification role


When the Fed tightens policy, the correlation between stocks and bonds tends to increase. With the Fed putting a halt to their tightening policy, the correlation between stocks and bonds should fall, and bonds should offer better diversification benefits as a result.


Past performance is not a guarantee of future results. Source: Datastream | Chart data: 30 June 1988 – 15 March 2019 Diversification does not ensure a profit or protect against a loss in a declining market.

Credit

Benign default environment


The US economy is still healthy, and default rates are low. This should be a good backdrop for US credit spreads.


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

Credit

Credit spreads are fair value


Credit spreads look cheaper than equity valuations.


1Option-adjusted spread (OAS) is a measurement tool for evaluating yield differences between similar-maturity fixed-income products with different embedded options. | Sources: Barclays, Wellington Management

Credit

Spreads indicate positive excess returns:
High yield


Current high yield spreads are consistent with patterns that have historically led to positive excess returns.


Past performance is not a guarantee of future results. Sources: Barclays, Wellington Management

Credit

Spreads indicate positive excess returns:
Corporates


Current BBB spreads are consistent with patterns that have historically led to positive excess returns.


Past performance is not a guarantee of future results. Sources: Barclays, Wellington Management

Credit

BBBs remain well positioned to service higher debt levels


BBB issuers generate solid free cash flow and, as a result, have the capacity to pay down their debt.


Source: Capital IQ | Chart data: March 1997 – September 2018

Credit

US investment-grade corporate index is less cyclical


The investment-grade bond market (as measured by the Bloomberg Barclays US Corporate Bond Index) has become less cyclical and more defensive as its sector composition has shifted in recent years.


Sources: Barclays, Wellington Management | Chart data: 21 March 2002 – 25 March 2019
Please see representative index definitions below.

Risks

Shift toward populism in US and around the world


Populism is a global theme (e.g., Italy, Brexit, Bolsonaro in Brazil, Trump, Yellow Vest protests, etc). In the US, leading Democratic presidential candidates have proposed populist policies on a number of issues.


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

Portfolio Construction

Consider diversifying exposure across economic environments


Diversifying portfolio exposure across all four possible economic environments can be a prudent approach.


Diversification does not ensure a profit or protect against a loss in a declining market.
REITs: Real Estate Investment Trust
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 is not a guarantee of 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, 1/19

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


Past performance is not a guarantee of 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, 1/19

Intra-year dips in emerging-market equities happen frequently


Past performance is not a guarantee of 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, 1/19

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. 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, 1/19.

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. “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 and Hartford Funds, 1/19

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. Indices are unmanaged and not available for direct investment. For illustrative purposes only. Please see representative index definitions below. | Data Sources: Morningstar and Hartford Funds, 1/19

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 7.4 years. US equities have outperformed international equities over the past 8.1 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. Indices are unmanaged and not available for direct investment. For illustrative purposes only. | Data Sources: Morningstar and Hartford Funds, 4/19

Stock market returns after significant oil price declines


Past performance is not a guarantee of future results. Indices are unmanaged and not available for direct investment. | 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 Economic Data, Morningstar Direct, and Hartford Funds.

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 is not a guarantee of 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, 1/19.

Timing the market is impossible


If you missed some of the market’s best months over the past 20 years, you would have been better off buying lower-risk Treasury Bills.


Past performance is not a guarantee of future results. Indices are unmanaged and not available for direct investment. For illustrative purposes only. Investors cannot invest directly in an index. | Data Sources: Ned Davis Research and Hartford Funds, 1/19.

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.
Please see representative index definitions below.
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.

Duration risk is rising: Are you prepared?


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.


Effective duration is a measure of price sensitivity to interest rate changes. | Data Sources: Bloomberg and Hartford Funds, 4/19. For illustrative purposes only.

Hypothetical impact of rising rates on fixed income


Past performance is not a guarantee of 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 – 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) | Data Sources: Bloomberg and Hartford Funds, 4/19.

Tax-equivalent yields1


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.
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. | Data Sources: Bloomberg and Hartford Funds, 4/19.

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 is not a guarantee of 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, 1/19.

Fund flows


TOP: Data includes flows through 11/18 and excludes ETFs. BOTTOM: Data includes flow through 11/18 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 12/31/18. | Data Sources: Investment Company Institute and Hartford Funds, 1/19.

Multi-asset views

Multi-asset outlook process

What's really changed?

Fed expectations: From a hike to a cut?

Global growth is deteriorating

Inflation leads have cooled

It’s time to consider rotating into quality and safety-oriented factors

US consumers are healthy

For now, government is helping business

European consumers have softened

Could falling European data find a bottom?

Japan depends on the yen

Early signs of China turnaround

Lower rates in China could lead to increased money supply

China matters more for equity indexes

Valuations relatively attractive outside US

Fixed income may resume diversification role

Benign default environment

Credit spreads are fair value

Spreads indicate positive excess returns: High yield

Spreads indicate positive excess returns: Corporates

BBBs remain well positioned to service higher debt levels

US investment-grade corporate index is less cyclical

Shift toward 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?

Stock market returns after significant oil price declines

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

Duration risk is rising: Are you prepared?

Hypothetical impact of rising rates on fixed income

Tax-equivalent yields

Municipal bond yields look attractive

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
US Equities

Consider more defensive sectors as global growth cools
EM Equities

EM could outperform if China reaccelerates
Fixed Income

Favor credit over equities

With credit, favor investment-grade bonds and high-yield bonds
ECONOMIC VIEW:
US Equities:
Consider more defensive sectors as global growth cools
ECONOMIC VIEW:
EM Equities:
EM could outperform if China reaccelerates
ECONOMIC VIEW:
Fixed Income:
Favor credit over equities

With credit, favor investment-grade bonds and high-yield bonds

1Credit exposure is the credit ratings for the underlying securities of the Fund as provided by Standard and Poor’s (S&P), Moody’s Investors Service, or Fitch and typically range from AAA/Aaa (highest) to C/D (lowest). If S&P, Moody’s, and Fitch assign different ratings, the median rating is used. If only two agencies assign ratings, the lower rating is used. Securities that are not rated by any of the three agencies are listed as “Not Rated.” Ratings do not apply to the Fund itself or to Fund shares. Ratings may change.

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Index Definitions
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 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 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).
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 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 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.
Core PCE price Index is the less volatile measure of the PCE price index which excludes the more volatile and seasonal food and energy prices.
Credit Suisse (CS) Leveraged Loan Index is designed to mirror the investible universe of the United States dollar-denominated leveraged loan market.
J.P. Morgan Emerging Markets Bond Index Plus is a market capitalization-weighted index based on bonds 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 USA Materials 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 Materials sector as per the Global Industry Classification Standard (GICS®).
MSCI USA Consumer Discretionary Index is designed to capture the large and mid cap segments of the US equity universe.
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 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 Information Technology 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 Information Technology sector as per the Global Industry Classification Standard (GICS®).
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 World ex USA Index captures large and mid cap representation across developed market countries, excluding the US.
Russell 1000 Index measures the performance of the large-cap segment of the US equity universe.
Russell 2000 Index measures the performance of the small-cap segment of the US equity universe.
S&P GSCI Commodity Index consists of 24 commodity futures on physical commodities across five sectors: energy, agriculture, livestock, industrial metals, and precious metals.
S&P/LSTA Leveraged Loan Index is a market-value-weighted index that is designed to measure the performance of the U.S. leverage loan market based upon market weightings, spreads and interest payments.
S&P 500 Index is a market capitalization-weighted price index composed of 500 widely held common stocks.
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 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.

Nanette’s economic views and the Hartford Funds Ideas are as of March 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. • Small- and mid-cap securities can have greater risks and volatility than large-cap securities. • Commodity investments are subject to additional risks. • Fixed income security risks include credit, liquidity, call, duration, and interestrate 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. • The value of inflation-protected securities (IPS) generally fluctuates with changes in real interest rates, and the market for IPS may be less developed or liquid, and more volatile, than other securities markets. • 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. • Loans can be difficult to value and highly illiquid; they are also subject to nonpayment, collateral, bankruptcy, default, extension, prepayment and insolvency risks.

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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