Inflation is at a 40-year high with no signs of abating, and the Fed may already be behind the curve. Jon Mackay, head of sales at Schroders, explains how investors can adapt to a high-inflation environment. 

Jon Mackay is not affiliated with Hartford Funds

financial professional during times of market volatility is what do I

actually say to my client? How do I communicate simple concepts? And

I think in a recent conversation we have with Jon Mackay? The

question you asked him about, what email would you send to clients? I

thought it's a great question, and I really appreciated his response

because I love those practical ideas even given by, you know, a

market strategist really helpful during times like we're

Julie Genjac: [00:01:04] Absolutely, I think he reminded us that when

we're steeped in these topics and themes day in and day out,

sometimes the way we articulate it to peers or colleagues is very

different than what we might want to share with clients. And

obviously, we know our clients want us to educate them and connect

them to resources. But I think taking a moment to really think about

that behind the scenes and maybe even have others read it for clarity

and to make sure that it's sending the message that we want is such a

great best practice, and I'm really excited to hear more of what Jon

John Diehl: [00:01:39] I really think that, you know, when we think

about how long it's been since many of us had lived in an

inflationary environment, man, it goes back a while and I think when

we even think one step further about decisions we make or help our

clients make investing decisions. It's been a long time since we've

had to think about the impact of inflation and even talking about

risks of recession threats to growth, rising interest rates. It's

Julie Genjac: [00:02:13] Absolutely, and think about the financial

professionals that have recently started their practice or join the

industry and that truly haven't gone through this type of market

cycle. These are new muscles that they're flexing and conversations

that just haven't been had. And I think digging in and doing the

research, but also crafting that message and making sure that there's

clarity in communication is so important, especially right now.

Julie Genjac: [00:04:01] And now let's dive into the podcast with

John Diehl: [00:00:01] Hi, I'm John. [00:00:02][0.8]

John Diehl: [00:00:04] We're the hosts of the Hartford Funds

Julie Genjac: [00:00:09] Every other week. We're talking with

inspiring thought leaders to hear their best ideas for how you

can transform your relationships with your clients.

John Diehl: [00:00:19] Let's go.

solutions at Schroders Investment Management, which involves working

in partnership with Hartford Funds to represent Schroder strategies

to financial professionals and intermediaries. He joined Schroders in

2016 and is based in New York. John was a senior market strategist at

the firm's sales force and clients on a variety of investing topics.

He authored in-depth reports and travel frequently throughout the

Americas to meet with high net worth individuals and middle market

institutions. Prior to this, he was a credit strategist at Citigroup

on the credit markets and coming up with trade ideas for the high

yield emerging markets and investment grade corporate bond desks. He

also worked as an analyst at Emerging Markets Securities LLC from

transactions. John, welcome to the podcast! [00:01:21][66.5]

me. [00:01:25][1.7]

very interesting time that financial professionals who who

participate on the podcast and listen are probably hearing more and

more inquiries from their clients about the topic that seems like

over the last two months really came out of nowhere. Some would argue

they saw it coming, but nonetheless it's been headline material and

that's the topic of inflation. And I guess to to lead off our

conversation today, Jon, what is Schroders saying about inflation and

Jon Mackay: [00:02:30] Sure, and to your point, John, inflation has

been a hot topic ever since we sort of emerged from the darkest days

of the pandemic, giving fiscal stimulus, given constraints on supply

chains and given the quick recovery in labor markets, not just here

in the U.S. but also around the world. And the argument was really

around whether it was transient and we would go back to an inflation

environment that we experienced leading up to the pandemic, which was

very, very low sort of a disinflationary environment or if it were to

remain high and persistent. And I think everyone's realized that it

is high and persistent. And the two primary drivers behind it, in our

view at Schroders, are wage inflation. When you pay a worker a higher

wage, you can't take it back. And a lot of companies have been forced

to do that to get people to come back in and work in factories,

stores, offices, et cetera, as well as housing. There has been a huge

demand shift in the housing market, and housing inflation is a huge

component of core inflation and that we think is going to remain a

driver of higher inflation over time as well. When we talk about

inflation, we're not talking about runaway scary inflation that you

see in the emerging market countries or that we experienced here in

inflationary environment than we experienced over the last 10 years

or even over the last 20 plus years. And that will have implications

for interest rates that will have implications for equities across

the cap structure. Both domestic equities and global equities. So I'm

sure we'll get into that. But it is, in our view, a regime change

Julie Genjac: [00:04:15] Jon, we at Hartford Funds conducted a survey

in conjunction with caravan and Engine Insights among about nine

hundred and eight consumers whose household income was seventy five

thousand or above or their investible assets were seventy five

thousand and over between February 14th and February 16th of this

year. You know, it's interesting. Our survey respondents said that

they were expecting the majority were expecting two to three rate

hikes this year at about 50 percent of respondents said that. About

14 percent said that they thought maybe there would be zero to one

hike. 16 percent said four to five hikes and then five percent

estimated six to seven. Obviously, none of our crystal balls are

perfectly clear, and I'm sure you're receiving this question day in

and day out. But given the current landscape, what is your thought on

the number of hikes that we'll see and how that will unfold

Jon Mackay: [00:05:11] Sure. So central banks, maybe just to define

what a central banks function is for the Fed to have two mandates,

it's to maximize employment and to ensure stable inflation

effectively control inflation over the long run. They have sort of an

unstated third mandate, which is to ensure stable financial

conditions. Some people call that the Fed put, meaning that if

financial markets sell off rapidly or they sell up to a big degree,

the Fed will step in and sort of either talk the markets into

stopping the sell off or ease policy so that markets stop their sell

off. That is not their primary mandate. And so what we think the Fed

is going to do is they're going to start hiking rates in March. The

market is currently pricing in six rate hikes this year, so those

respondents that were in that five to six rate hike camp, I think it

was about five percent of them were at least in line with where the

markets are pricing in. And I think that is the trajectory will be on

for the next several years once they start hiking. It's very hard to

put that genie back in the bottle given the high levels of inflation

we are currently experiencing. Some people would argue the Fed is

actually behind the curve. They should have started this already. We

think that's a little bit off base. If the Fed does things too

quickly, if they tighten financial conditions too rapidly, which is

the function of hiking rates, you risk putting the economy back into

a recession, and they certainly don't want to risk doing that. So we

think four hikes this year is a reasonable expectation, a little bit

lower than what the market is currently pricing in. But it would be

four hikes this year, accompanied by additional hikes next year and

probably additional hikes the year after. So very much in the

tightening regime, which again, back to John's original question,

obviously will have an impact on the economy and it will have an

John Diehl: [00:07:04] So, Jon, as I think back to those storied

typical age of your typical financial professional. And what I

remember about inflationary times was waiting in the back of my mom's

corvair as we waited to fill our gas tank on odd or even days, right?

Based on our license plate numbers. So my question, Jon, is that I

think many financial professionals, especially those who are not

really in the analytical part of the practice, but in the client

facing, we know the challenges of higher costs on our clients, right?

And trying to stretch those retirement dollars, you know, to give

them the retirement that they need. But if I could back you up for a

second to talk about maybe inflation and its impact on various asset

classes like you read that hey, equities are usually a decent place

to be. And when I say this, I do it within the context of

understanding we put together balanced portfolios for our clients.

However, if we were to look at the different sectors, what is the

risk of inflation from an aligned analytical standpoint in terms of

owning equities, owning fixed income and owning perhaps commodities

or other things that may not always be represented in a client's

Jon Mackay: [00:08:28] Sure. So, I mean, the irony is, I mean, you

talk about your childhood sitting in the back of your mother's car.

started to come down as Paul Volcker hiked interest rates to

incredibly high levels to tighten financial conditions and stop that

wage price spiral, as well as just the the price spiral that you saw

across a variety of different goods, energy being one of the biggest

ones. And when prices are moving higher, it eats into the spending

power that you have in your bank account or you have in your wallet

or that a company earns. So if you think about financial instruments,

bonds or equities, if an equity can earn enough revenue at a pace

that's higher than the rate of inflation, it could do well. So that's

the point you made. Equities can be a reasonable inflation hedge as

long as inflation isn't running away at at unreasonable levels. Fixed

income really struggles in that environment. You're getting a fixed

coupon payment every six months, sometimes every quarter, sometimes

annually, depending on the structure of the bond. And if prices are

moving higher, that fixed coupon payment isn't enough to pay for

those higher prices. And so, you know, bonds can struggle in that

environment. There are certain types of bonds that have a what we

call a floating rate, where the rate of interest you get receive

rises with a benchmark like T-bills or Fed funds or something like

that. So those can be the kinds of instruments that can do OK in an

inflationary environment. But commodities are the best inflation

hedge you can find you pull a material out of the ground that's

priced almost instantly and you sell it for the cost of that

material, plus a little bit of a premium for the cost of pulling it

out of the ground. Whether that's energy, whether that's industrial

materials, whether that's gold, which doesn't really have a utility

use but is viewed as a pretty good inflationary hedge. So commodities

will be the best hedge. The other way to think about the equity

market is while some companies are going to be able to absorb those

higher prices, and that will result in higher revenues and it won't

impact their earnings too much and they should hold up OK. Is what's

your starting point? What is the price you're paying for those future

earnings and how susceptible either negatively or positively are

those earnings to higher prices? There are some companies. This is an

easy one. Energy companies and I'm speaking in generalities here,

they're going to be some good and some bad energy companies that

obviously will be beneficiaries from higher energy prices. And so

could do well in an inflationary environment. They're going to be

other sectors that just don't have that pricing power and going to

struggle a little bit. So I think it's a it requires a complete

rethink of how you allocate to equities. And maybe the playbook over

the past 10 years is not going to be the playbook going forward over

Julie Genjac: [00:11:19] John, it's interesting, you know, when you

think about inflation and purchasing power, I know that

unfortunately, I'm one of those individuals that tends to memorize

prices of things that I go to a store for whatever reason it sticks.

And so I know just yesterday I went to the store and I just noticed

just, you know, things are so much more expensive. And when you're

chatting with financial professionals and their clients, as I know

you do on a daily basis, what is the sort of mental and emotional

impacts that this has on individuals? And what are your thoughts on

that? Just as we as consumers and kind of engaging in and purchasing

just daily items that seem to be so much more expensive? You know,

Jon Mackay: [00:12:04] Well, you're very different than me, Julie, I

have no idea what I paid for a gallon of milk last weekend. I should

probably start paying attention. My wife certainly does. So I think I

would break the curse. Trust me, it sounds like it is. I would rate

the consumer up into different cohorts. So the consumer in general is

in the best shape we've seen from a financial perspective in over 40

years. Household debt to income ratios are 40 year lows. We are

seeing wage growth not quite enough to keep up with the pace of

inflation yet, but it is increasing in pace. Lower income consumers

are unfortunately going to be the hardest hit by higher prices at the

gas station and high prices at the grocery market, and higher prices

for things like clothes, basic goods, heating your house, cooling

your house, et cetera. We are seeing wage growth in that cohort, but

nowhere near enough to offset the higher basket of prices of goods

that we need on a daily basis. Higher income consumers probably don't

have to worry all that much. Maybe at the margin it impacts their

discretionary spending. You take one less vacation, you go out to one

less fancy dinner. But in my conversations with advisors and clients,

it's that cohort that probably doesn't talk about inflation that

much. They probably talk about it more in terms of the impact on

their portfolio. But it is the middle to lower income consumers that

are really starting to feel the pinch from higher prices. And that's,

you know, that's an area that we're keeping a close eye on because

consumer spending, as we all know, is a huge component of U.S.

economic growth 70 percent plus, and everyone contributes to that to

varying degrees. So if it really starts to impact the spending power

of lower income and then moves up the chain to middle and higher

income consumers, then we could have an economic growth problem on

John Diehl: [00:13:59] Jon, it's interesting I want to shift the

topic a little bit to the topic of market volatility because earlier

this week when I was doing a client event, there was one couple that

came early and the gentleman looked at me and said, How much longer

are we going to have to put up with this? And I kind of laughed. I

didn't know what he is talking about. He said, this market, this

market's killing my retirement funds and this topic of volatility. I

know obviously there are many factors that go into it. Inflation

being one of them, obviously. But the market volatility right now, do

you think? How much do you think it's based on everybody guessing at

what the Fed's going to do, how many rate rises, how much are they

going to do? And I guess from Schroeder's standpoint, given any feel

for how long this volatility is going to last, I know the market

hates uncertainty. Are we anywhere near any kind of certainty on

Jon Mackay: [00:14:55] John, I wish I gave you a day at a time. I

would expect volatility to remain higher until the market has a

better sense of the pace of rate hikes from the Fed and what the

final terminal rate meaning. What's the what's the end? No, they get

to right now they're at zero. Do they stop hiking rates at one and a

half percent or two or two and a half percent down the road? The

higher that number is, by the way, the better. All else equal, that

means that the economy is in good enough shape to absorb those higher

rate hikes, and inflation is high, but it's not running rapidly out

of control. The other thing to remember to your to the person you

were speaking to earlier this week is that we came out of an

unbelievably low volatility environment that was helped by a lot of

fiscal stimulus, a lot of market participation, as well as monetary

stimulus. So the Fed has not only been cutting interest rates or had

interest rates at zero. They've also been buying securities to the

tune of 80 billion per month in the market, which provides a lot of

liquidity to the market. They're heading in the other direction, so

I'd think about it like turning a giant cruise ship or a tanker at

sea when you're heading into the waves. It limits the volatility of

that ride when you turn broadside to the waves, which is what the Fed

is doing right now. You're going to take a couple of hits to the side

and it's going to increase the volatility and some people are going

to get seasick or I don't know what the equivalent thereof is in the

markets, but you know, it creates more volatility until we get

certainty we can start heading in the other direction. The other

piece of the puzzle is valuations. So heading into the end of this

year, the S&P 500, was it incredibly high valuations? I'm not the

highest we've ever seen. Nothing outrageous, but not high. Not at a

reasonable enough level to deal with tighter financial conditions

which eat into or raise the premium through which you would want to

pay for future earnings growth. And so that's what the market is

adjusting to right now. There will be an end point. There'll be a

time at which there is enough of a risk premium priced into risk

assets, meaning you're getting enough compensation for buying

uncertainty heading into a tighter financial markets, tighter

financial conditions in the markets that it's reasonable and that

will subdue the volatility that we've seen. But it's that adjustment

phase that turning broadside to those waves at the Fed valuation, et

cetera, that the market's trying to deal with right now. So there

will be an end day. My guess is it's in the next couple of months

that I don't know exactly how much longer it's going to last.

Julie Genjac: [00:17:30] You know, it's funny, Jon, I don't think in

the time we've been together today that we've even mentioned the word

COVID or pandemic, which obviously for the last two years, that's I'm

sure you're just exhausted from saying those words in terms of your

your commentary and conversations. I mentioned that survey that we

performed a few minutes ago, and it's when investors were surveyed on

what was what most worried them about their portfolio performance

going forward. It's interesting COVID ranks fairly low on the list.

And I'm just curious from your perspective, where are we in terms of

the pandemic and its impact on the global markets and inflation? And

how does that factor in? Obviously, it's something that we have all

heard about and are maybe growing a little bit numb too over the last

couple of years. And is that rightly so? Or will you give us some

Jon Mackay: [00:18:29] I've got I've got to put on my my doctor's hat

Julie Genjac: [00:18:35] Please, please do. Dr Mackay. [00:18:36][0.9]

certainty about this because we've been bitten before you variants

obviously could emerge that are, you know, that aren't that that the

vaccines can't, can't take care of something good come out of left

field, I guess, is my point. It seems more likely, though, that we've

had we we're heading very much into the endemic phase of the

pandemic, meaning governments are starting to loosen restrictions

with the understanding that you're either at a level of vaccine

provided immunity or you've got enough of your population that is

already contracted the coronavirus, that they have built in immunity

to what we currently know about the virus. So like I said, as long as

there's not another variant that is able to evade the vaccines, I

think we're heading into a period of time where it unfortunately will

be with us. It seems like flu is forever, but it won't be the primary

topic of conversation, let alone the primary driver of markets or our

economies. We're not quite there yet. It's not, you know, breathed a

huge sigh of relief. COVID is completely behind us. There are still

countries that are dealing with it. Hong Kong, for example, is

dealing with a pretty big outbreak right now. But I do think we're

past the worst of it, and it'll be a return to focus on things like

inflation. What is the Fed doing? What's the path of earnings? What's

the path of wages? What's to pass a path of economic growth around

John Diehl: [00:20:07] Jon, if I can go back to asset classes for

just a moment and thinking about U.S. investors during inflationary

times, is there more of a case to be made for for overseas investing,

for foreign investment in both the equity or credit markets? And then

just specifically, what is Schroders saying about the credit portion

of a client's portfolio right now? I mean, I always look at times

like this is saying nobody seems to think about bond diversification.

You mentioned a little bit about, you know, floating rate securities.

Is this one type, but is now a good time to do a review not only of

the equity holdings, but also the credit securities in the client's

Jon Mackay: [00:20:53] So we're actually pretty comfortable with

credit writ large, meaning the fundamentals of companies in the US as

well as overseas are actually very, very strong. They've had plenty

of access to liquidity, so they've been able to refinance higher

interest rate debt, lower their cost of capital earnings for

companies not just in the U.S. but around the world are pretty good

as well. So that allows those companies to generate enough earnings

to pay their debt loads and not raise the risk of default. And that's

your biggest, you know, that's your biggest risk when you're

investing in credit. So we're very comfortable credit the risk to

fixed income and credit specifically. How much duration do you have

in your portfolios? And so I think that's the biggest need for a view

across clients. Books of business is duration has extended over the

last 10, 15, 20 years. You've seen the Barclays AG using that as a

proxy used to have a duration of around four and a half years. It's

close to the six and a half today. So duration is extended, which

means if interest rates rise, which we expect them to, that's going

to eat into your return over time. So if you can think about asset

classes like floating rate loans or non-agency securitize where you

have a floating component to your to your interest rates, your income

that can help mitigate some of the risks that you might have in your

portfolios. I think it's less about default risk and more about

duration risk these days.

talk equities, so. And the reason I wonder about overseas

international investing is that I think that the maybe the assumption

is that emerging markets economies are largely commodities based and

maybe they'll do better in kind of an inflationary environment. It's

I hate to generalize because every period is different. But what is

Schroders saying right now about the international markets? And even

if you have to be more specific about international and then maybe

part B of that question is how should we be thinking about emerging

Jon Mackay: [00:23:04] Sure. So I'll answer that question in two ways

one, from a just broad international perspective, I would think about

it from a valuation perspective. So international equities trade

cheap relative to the U.S., whether it's Europe, Japan or emerging

markets, if we're in a rising interest rate environment, that means

the discount rate you apply to future earnings is going to be higher.

And that means that people are going to be paying more attention to

what is the path of future earnings growth and how much am I willing

to pay for that today in a low growth environment environment where

interest rates are at zero? People are willing to take on a little

bit more risk and pay for earnings that might be two three, maybe

even five years out in the future. So think about some of the glamor

stocks that have done really well here in the U.S., new businesses,

new technology, disruptive companies that people sort of fell in love

with. And, you know, unfortunately come back down to Earth as people

realize, well, maybe it's not worth paying a very high price for a

company that hasn't generated earnings today. A lot of European and

Southeast Asian, whether it's Japan or the emerging countries within

Southeast Asia, are businesses that are quite frankly, fairly boring.

Their energy companies are industrial companies, their telecom

companies, their banks. They trade with cheap evaluations because

they're not that exciting and they have very robust future earnings

growth. Again, I'm speaking in generalities that are going to be some

good, bad and sort of indifferent companies within those markets. But

I think if you think about the makeup of those markets, is more of

those companies over there in those indices than there are here in

the U.S., so we are pretty bullish on the international market. The

second piece, the second answer, your question is about commodities

in general. We think we're in a in the early innings of a commodity

supercycle for one very primary reason that is better economic growth

is part of it, but also lack of supply, whether it's energy,

industrial metals or even soft commodities like wheat, soybeans,

barley, coffee, cotton. There just hasn't been enough money put into

generating those goods, those materials over the last 10 years

because you had a commodities bear market. So as growth improves,

demand increases, supply is not going to catch up to meet it. And so

commodity prices are going to do well. You can either invest directly

in commodities or you can invest in companies that pull those

materials out of the ground or generate those goods and sell it on

again. A lot of those are in international markets. And to your

point, earlier, John, there are some commodity producing countries

where literally that's all they do, whether it's soft commodities or

energy or industrial metals. So those could be good opportunities as

Julie Genjac: [00:25:48] Jon, obviously, we have covered a lot of

territory today, and as I hear all of the different themes and topics

that you've shared and how they evolve minute by minute, given the

day and the time of day that we're in. You know, for financial

professionals that that John Diehl and I talk with every single day,

that's one of the biggest challenges is the volume and velocity of

information that is flowing into them and their team and coordinating

that and then consistently putting out messaging to clients and

delivering that great client experience. How do you and your team

filter through the information, especially right now during periods

of great volatility and really kind of process that and make sure

that you're on top of it, communicate internally in order to put

messages out externally? Are there any tips that you can share for

how you do that? Because obviously you're very successful, and I know

that that is certainly a hot topic for financial professionals day in

Jon Mackay: [00:26:48] It's a great question, Joel, and you make me

think about how I do it like there's some grand plan. So the best

piece of advice I can give is to is to write it down. So something's

happening in the markets. Markets are selling off. Markets are

rallying. There's a sector or a piece of the portfolio that's

struggling. Write down what you think is happening and how you would

convey that to your clients. To me, it's a it's a great rule when I

used to work and research early in my career. You would write a note

and the way I write is, I simply put all my thoughts on a piece of

paper. And then I go back and edit it and make sure that it's

digestible to wherever the end consumer is. And I found that still a

great rule of thumb. So with my team, if something's happening in the

markets, so we want to get a message out. I force everyone on the

team that's going to lead that messaging to write it. Share it with

the team will add our thoughts to it, will help edit it and make sure

that it is remembering who the audience is. Is this understandable to

someone who may not spend every minute, every hour of the day looking

at the financial markets and trying to interpret little my new pieces

of data, and you can get lost in that data very, very quickly. So

that's what we try to do. That's our rule of thumb. If you put

something in writing, it's a great way to make sure that your message

John Diehl: [00:28:11] Jon, before we wrap up, I'd be remiss if if I

didn't at least ask about the impact of geopolitical events right

overall on economic growth and inflation and so on, so forth. You

know, in recent days, Ukraine has certainly been in the headlines,

but there are always geopolitical risks, it seems like. Remember, a

few years ago we had a we had a presentation that called It's always

something. It's Schroeder's. How do you how do you incorporate the

geopolitical risk? Like, how do you begin to assess what that is?

And, you know, even if it is always something, then you know, how do

we ever evaluate the impact on inflation, economic growth and really

Jon Mackay: [00:29:00] It's a great question, John, and my response

this time a year ago would have been ignored geopolitics, to your

point, there's always something, there's always a big headline that

tries to grab your attention, and most of the time it has little to

no impact on the economy, whether it's the global economy or a

country specific economy or the markets. The Russian Ukraine

situation is a little bit different just because of the impact on

inflation. We don't know what's going to happen. I'm not going to

pretend to be a Russia Ukraine political or geopolitical expert, but

it could exacerbate trends that were already in place, meaning you

could get a surge higher in inflation because of energy and commodity

prices going up. You could get a slower pace of economic growth. We

thought growth was going to slow down globally this year. They'll be

at a very, very robust level, but slow down. It could slow down even

further and could also raise the risk premium in markets, given the

level of uncertainty. So very hard to analyze. But I think most of

the time it doesn't have much of an impact. This one is definitely

different. And I think unfortunately, given the events we've seen

over the past couple of days, it will have an impact on inflation and

it will have an impact on economic growth going forward. But

marginally, I wouldn't get carried away here. We do not think it's

going to lead to runaway inflation. We do not think it's going to

lead to a global recession or a U.S. or European recession. Anything

along those lines. But it will exacerbate the slowing downtrend we've

Julie Genjac: [00:30:37] Jon, we can't thank you enough for your

thoughts and insight today, and I am confident that the financial

professionals joining us and listening will find it so insightful and

helpful as they continue to deliver timely messages to their clients.

You mentioned drafting that email, which I think is an incredible

best practice. By the way, if you were drafting an email, if you were

sitting in a financial professional's chair looking to communicate

some of these points to clients say tomorrow, what would some of the

key points be on that email? What what do you think that client

should really be thinking about or being educated on given the

Jon Mackay: [00:31:16] Sure. So I think some of the key points would

be as follows you need to stay invested, right? You know, if you're

investing for retirement, investing over the long run is the best way

to ensure that you can generate enough income in retirement to live

comfortably live within your means, but you need to rethink how

you're investing. The playbook over the past 30 years has been some

combination of, you know, long duration bonds will help you mitigate

equity volatility as well as generate income. US equities have done

extraordinarily well over the past 10 years. You've had a

disinflationary environment, and that regime shift means that you've

had to rethink your bond portfolio. It's still very much plays a role

as ballast. That may be the components you use are a little bit

different. Use some floating rate, use some non-agency securities,

shorter duration fixed income to help mitigate volatility and

generate a little bit of income and just rethink how you're allocated

to equities. U.S. equities is still going to do great, we think, over

the next three to five years, but there might be better opportunities

in overseas markets. So it's not a dramatic shift. It's just

rethinking where you're generating return and where you're mitigating

risk within your portfolio versus what you might have done over the

John Diehl: [00:32:32] Well, Jon, as always, thank you for your

insight, especially during these times of volatility, I always want

to say unprecedented volatility, but Jon, you and I both know that

we've seen these periods in the past. We'll see them again in the

future. And your point of long, fortunately. So, Jon, just on behalf

of Hartford Funds and all of the folks listening today, I just want

to say thanks. Thanks for your insight. Thanks for the ideas that we

can share with our with our clients, because that's probably the most

important thing during these times of volatility is make sure that

we're communicating with our clients, giving them a couple of things

to think about that maybe we'll we'll widen that that time length.

And I should say that time horizon to give them the perspective they

need. So. Jon, always great talking to you. Thanks again.

Jon Mackay: [00:33:26] Thanks so much, Julie - John. Great to be

Julie Genjac: [00:24:37] Thanks for listening to the Hartford Funds.

Human Centric Investing podcast, if you'd like to tune in for more

episodes. Don't forget to subscribe wherever you get your podcasts

John Diehl: [00:24:51] And if you'd like to be a guest and share your

best ideas for transforming client relationships, email us a guest

booking at Hartford Funds dot com. We'd love to hear from you.

Julie Genjac: [00:25:02] Talk to you soon.