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Charts That Got Us Thinking

3Q 2019 Outlook: Tariffs, Trade Tensions, and Tenuous Growth

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Multi-asset Views


Shrinking business investment is likely to contribute to already slowing global growth, and Nanette Abuhoff Jacobson thinks the response from global central banks will ultimately underwhelm the markets. Therefore, she thinks investors should consider positioning their portfolios more defensively than they may have in recent years.

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


As of June 2019. | Source: Wellington Management

Multi-asset Views

Multi-asset outlook process


Nanette assesses each asset class on a 5-point scale based on economic fundamentals, fiscal/monetary policy, and valuations.


As of June 2019. | Source: Wellington Management.

Multi-asset Views

Safety has outperformed since tariff announcements


Returns were strong in the first half overall, but since President Trump’s May 5 threat of "tranche 4 tariffs," safety- and quality-oriented areas have outperformed.


11 January 2019 – 3 May 2019 | 23 May 2019 – 28 June 2019 | All returns in local currency unless otherwise stated. Currency returns are versus the USD. | Past performance is not a guarantee of future results. Indices are unmanaged and not available for direct investment. | Sources: Bloomberg, Wellington Management. | Please see representative index definitions below.

Multi-asset Views

Unclear equity performance after first rate cut


Equities have tended to do well leading up to Fed rate cuts because the market anticipates the rate cuts. After the initial rate cut, however, equity performance has been mixed.


Rate cut time periods: 1995: 6 Jan 1994 – 6 Jan 1997; 1998: 29 Mar 1997 – 29 Mar 2000; 2001: 29 Jul 1999 – 29 Jul 2002; 2007: 18 Mar 2006 – 18 Mar 2009 | Past performance is not a guarantee of future results. Indices are unmanaged and not available for direct investment. | Sources: Federal Reserve, Bloomberg, Wellington Management

Multi-asset Views

Consider rotating into quality- and safety-oriented factors
Factor families: Results across the cycle


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


Each bar represents the average monthly excess return relative to the MSCI USA Index for factors within each family. Factor category definitions: Riskseeking: 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. | Past performance is not a guarantee of future results. Indices are unmanaged and not available for direct investment. | Sources: FactSet, FTSE, and Wellington Management | Please see representative index definitions below.

Interest Rates

The Fed may struggle to deliver what markets expect


Fed rate cuts may not lead to risk-asset1 outperformance because the market is pricing many more cuts than the Fed plans to deliver. It’ll be difficult for the Fed to meet market expectations.


1Risk assets (such as equities, commodities, high-yield bonds, real estate, and currencies) have a significant degree of price volatility. As of 19 June 2019 | Market and Federal Reserve expectations for Fed funds rate at end of each year. | Actual results may vary, perhaps significantly, from the forecasts presented. | Sources: Federal Reserve, Bloomberg, Wellington Management

Interest Rates

A tale of two US yield curves


While the media focuses on the spread1 difference between 10-year and 2-year Treasuries, which has recently steepened some, the difference between 2-year and 3-month Treasuries still indicates that Fed policy is currently too tight.


1Spreads are the difference in yields between two fixed-income securities with the same maturity, but originating from different investment sectors. Source: Bloomberg | Chart data: 31 December 2018 – 25 June 2019

Global Fundamentals

Global growth is deteriorating


Money supply is a good leading indicator of growth (as measured by PMI) and points to continued weakness ahead. It’s comforting, however, that money supply has stopped falling.


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. 2GDP-weighted M1 money supply includes US, Europe, Japan, and China | Sources: Bloomberg, Markit, Wellington Management | Chart data: July 1997 – May 2019. X-axis scale range is January 1998 to November 2019 due to M1 being forwarded 6 months. M1 data is from July 1997 to May 2019 (i.e., first data point represents July 1997 and final data point represents May 2019). PMI data is from January 1998 – May 2019

Regional Equities

US consumers are optimistic


US consumers are still pretty healthy as evidenced by strong consumer confidence.


Sources: Conference Board, University of Michigan | Chart data: December 1995 – June 2019

Regional Equities

Trade uncertainty threatens US businesses


As trade policy uncertainty has increased sharply (dark blue line inverted), businesses face the prospect of slowing growth (as measured by PMI).


Sources: Baker, Bloom & Davis, Institute for Supply Management, Bloomberg | Chart data: December 1995 – May 2019

Regional Equities

US equities have tended to outperform in choppy markets


Despite uncertain trade policy in the US, Nanette still favors US equities because they have tended to do best in choppy markets. For example, when Japanese equities have experienced a negative quarterly return, the US has outperformed Japan 84% of the time.


Time period: 1999 – 2018. Number of observations: Japan 37 negative quarters, Europe 34 negative quarters, Emerging markets 31 negative quarters. For example, during that time period the Japan market experienced 37 quarters of negative performance out of which the US market outperformed 31 quarters (84%) and underperformed 6 quarters (16%). | Past performance is not a guarantee of future results. | Sources: Bloomberg, Wellington Management | Please see representative index definitions below.

Regional Equities

Could falling European data be bottoming?


European manufacturers are in recession as the PMI is below 50. However, the ZEW leading indicator points to some stabilization in coming months.


*“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 – June 2019. X-axis scale December 2004 – September 2019 due to ZEW EZ growth expectations being forwarded 3 months. ZEW EZ growth expectations data is from November 2004 – June 2019 (i.e., first data point represents November 2004 and final data point represents June 2019. Markit EZ Manufacturing PMI data is from December 2004 – May 2019.

Regional Equities

Japan depends on the yen


Japan’s relative economic performance depends on the yen. When the yen goes up (light blue line is inverted), Japan’s economic cycle lags the global economy. The yen tends to rise during times of stress, and Nanette recommends a moderately underweight position in Japanese equities.


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

Regional Equities

EM equities tend to underperform later in the economic cycle
Late stage and bust


The top panel shows the performance of various asset classes vs. global equities during late stage (orange) and bust (red) cycles.

The bottom panel shows the percentage of time each asset class has outperformed global equities during late stage and bust cycles. Safer assets do best during late stages, and risky assets such as EM equities do poorly. EM debt looks attractive here due to its long duration, and rates tend to fall during bust cycles.


US Treasury 7 – 10 yrs: BoA ML US Treasury 7 – 10 Years (Apr 1973 – Sep 2018); US IG: BoA ML US Corporate Master (Dec 1972 – Sep 2018); US high yield: ICE BoA ML US High Yield (Aug 1986 – Sep 2018); EMD: JPM EMBI+ (Jan 1994 – Sep 2018); EM equities: MSCI Emerging Markets (Dec 1987 – Sep 2018) | Past performance is not a guarantee of future results. | Sources: Haver, Datastream, Wellington Management. | Please see representative index definitions below.

Regional Equities

EM increasingly drive the global economy


Long-run economic growth is largely a function of working-age populations that are expected to rise more in emerging markets (EM) vs. developed markets (DM). EM is already contributing an increasing amount to global growth, so long-term investors should consider an allocation to EM equities and bonds.


Sources: Haver, Wellington Management | Chart data: 1991 – 2018

Regional Equities

Valuations relatively attractive outside US


US equity valuations are expensive relative to their own histories (top panel), and the relative premium of investing in US equities is higher than it has been historically (bottom panel). Nanette still recommends an overweight to US equities because valuations aren’t very meaningful in the short term.


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 31 May 2019 | Sources: MSCI, Datastream, Wellington Management

Credit

EM debt: Wide divergence between high and low quality


EM debt spreads look attractive at the index level (light blue line), but when we look at just the investment-grade components of EMBI+, spreads are much less attractive.


Past performance is not a guarantee of future results.
Source: Bloomberg | Chart data: 13 January 2011 – 19 June 2019 | Please see representative index definitions below.

Credit

Fixed income may resume diversification role


When the Fed tightens, fixed-income correlations tend to go up and stocks tend to go down. This correlation tends to reverse itself when the Fed stops tightening, as they’re expected to do soon. Going forward, fixed income should play a better diversifying role in client portfolios.


Past performance is not a guarantee of future results. Diversification does not ensure a profit or protect against a loss in a declining market.
Source: Datastream | Chart data: 30 June 1988 – 19 June 2019

Credit

Benign default environment


Spreads shouldn’t widen in a low-default environment. This is a function of the relatively solid US economy.


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

Credit

Credit spreads are fair value


While spreads are trading at about fair value, they look cheaper than US 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


High-yield spreads are consistent with the historical pattern for positive excess returns.


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

Credit

Spreads indicate positive excess returns:
Corporates


BBB spreads are consistent with the historical pattern for positive excess returns.


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

Credit

US investment-grade corporate index is less cyclical


Less cyclical areas of the investment-grade market have grown relative to cyclical areas. As a result, the market is less cyclical overall.


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

Risks

Trade war could disrupt supply chains and incur costs


The list represents the top goods in tranche four of China tariffs that have been put on hold following the G20 Summit. If enacted, companies would have faced higher input costs since a high percentage of these goods are sourced from China.


As of December 2018 | Sources: US Census Bureau, Otexa, Wellington Management

Risks

Americans are skeptical about China’s trade policies


Why is the Trump administration pursuing aggressive trade policies against China? Because Americans view China’s trade policies against the US as unfair. Thus, politicians from both sides of the aisle support being tough on China, and this issue is likely to persist regardless of who is in the Oval Office.


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.

Risks

Shift toward populism in US and around the world


Populism is pervasive around the world, and many of the leading Democratic presidential candidates have proposed populist policies on a number of key 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. | Data Sources: Morningstar and Hartford Funds, 7/19 | 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 7.4 years. US equities have outperformed international equities over the past 8.3 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, 7/19

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 30 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.
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, 7/19. 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, 7/19.

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, 7/19.

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, 7/19.

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.


1 MSC hypothetical 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 are no guarantee of future results and an investment can lose value. The MSC hypothetical 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 5/19 and excludes ETFs. BOTTOM: Data includes flows through 5/19 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, 7/19.

Multi-asset views

Multi-asset outlook process

Safety has outperformed since tariff announcements

Unclear equity performance after first rate cut

Consider rotating into quality- and safety-oriented factors

The Fed may struggle to deliver what markets expect

A tale of two US yield curves

Global growth is deteriorating

US consumers are optimistic

Trade uncertainty threatens US businesses

US equities have tended to outperform in choppy markets

Could falling European data be bottoming?

Japan depends on the yen

EM equities tend to underperform later in the economic cycle

EM increasingly drive the global economy

Valuations relatively attractive outside US

EM debt: Wide divergence between high and low quality

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

US investment-grade corporate index is less cyclical

Trade war could disrupt supply chains and incur costs

Americans are skeptical about China’s trade policies

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

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

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
Fixed Income

Favor credit over equities

Within credit, favor investment-grade bonds and high-yield bonds
ECONOMIC VIEW:
US Equities:
Consider more defensive sectors as global growth cools
ECONOMIC VIEW:
Fixed Income:
Favor credit over equities

Within 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 Index captures large and mid cap representation across developed market countries.
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 June 30, 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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