2022 Investment Outlook

Allspring Allview 2022

The start of the year marks a good time to reflect on long-term trends, acknowledge notable milestones, and reset with new data as we position for 2022. We find ourselves tackling a new set of challenges while embracing our distinct Allview approach that unites expert independent thinking, disciplined risk management, and diverse perspectives with a deep understanding and care for our clients. Our senior experts offer their insights and outlook.

Triangular geometric shapes fit together to represent the many lenses Allspring looks through in the investing landscape.

The More Things Change, the More They Stay the Same.

This is our first year as Allspring Global Investments, an independent entity. While so much about the market has changed, we understand that investors’ concerns about their portfolios remain top of mind. This year we challenge our investment teams to think differently as themes play out and new opportunities become available.

Read Now (PDF)

The More Things Change, the More They Stay the Same.

This is our first year as Allspring Global Investments, an independent entity. While so much about the market has changed, we understand that investors’ concerns about their portfolios remain top of mind. This year we challenge our investment teams to think differently as themes play out and new opportunities become available.

Read Now (PDF)

Podcast: Taking an Allview Approach. Different by Design.

On the companion podcast, co-Chief Investment Officers Jon Baranko (Fundamental) and Daniel Morris (Systematic) discuss how the Allview approach of not enforcing a “house view” is a differentiator and part of our cultural fabric. Diverse perspectives allow our portfolio managers to have different outcomes and risk aversions.

Allview: Unique Viewpoints Delivered Together as One

Announcer: Welcome to the Allspring Global Investments podcast where we explore what's happening in the markets and discuss our outlook for the ever-changing investment landscape. Thought leaders provide their views on the latest global trends in sustainability, technology, emerging markets, and more. Join us as we take you down the road of investing elevated.

Kelly Vives: Welcome to On the Trading Desk®. I'm Kelly Vives, chief marketing officer of Allspring Global Investments.  Today, I'm joined by Jon Baranko, chief investment officer of Fundamental Investments, and Dan Morris, chief investment officer of Systematic Investments. I'm excited to share with you that we've recently released our 2022 Insights report, titled The More Things Change, the More They Stay the Same. We discuss current market factors that are shaping our outlook for 2022 as well as an introduction of our Allview investment approach. I encourage our listeners to check out this report on allspringglobal.com. Jon, Dan, thank you so much for joining me.

Jon Baranko: It's great to be here, Kelly.

Dan Morris: Thanks, Kelly.

Kelly: Let's reflect on 2021 and where we are today. What are some of the key market developments that you would highlight? Jon, can you start us off?

Jon: Sure, happy to. It's been an amazing few years since the pandemic took hold of the economy. And as we look at the fiscal and monetary stimulus that's provided a lot of tailwinds in the economy, it's really provided a backstop for risk assets globally. And so the effects of all that have been to really accelerate the stimulus and the economy, really accelerate technology and productivity's impact on our lives and that's translated into strong earnings and in markets through 2021.

And so as we came through 2021 and have really seen that the impact of that has been quite successful, there has been a side effect of that that is affecting the economy and spreading out into the economy, and that's inflation. It seems like everyday goods, like food and gas and clothing, the prices have shot higher and we're seeing inflation running close to 7% as we enter 2022. So this is going to have a big impact on both Congress' and the Fed's [Federal Reserve] ability to impact their stimulus programs going forward. And so it's a pivot point here in the market and really a time for investors to take a step back and consider the impact of that and really probably the most dramatic effect of that, which is a change in the low interest rate environment that we've been in for decades.

Kelly: So I think it's fair to say we are in a constantly changing world and disrupted macroenvironment. Dan, how will these factors impact us as we look ahead to 2022?

Dan: I agree with Jon's assessment. Interest rates are really a core component of pricing across global capital markets. If we are heading higher in interest rates and the markets begin to price in higher long-term inflation expectations, I think we're going to begin to see certain factors there that have benefited most from a low-rate environment back up a little bit. Other areas, like value stocks or inflation-sensitive assets, for example, might come into favor. If the dollar begins to weaken, you're probably going to see non-dollar-denominated assets coming into favor, too. The language we use to describe this reshuffling of values in the market is a rotation.

Kelly: Thanks, Dan. A lot to take in there. Jon, what's your view on how this rotation impacts investors?

Jon: Generally, we think the rotation's going to play out over a period of time. Much of the commentary of the markets right now as we go through the recent correction is focused on the immediate impacts of what's going to happen, especially in a period like we're going through now with the volatility. And so I think it's equally important for investors to think about some of the intermediate- to longer-term implications. And the market has a lot of head fakes. It causes people to temporarily abandon the long-term strategic asset allocation and now is a time for really patience and discipline. A good example of this is the rotation into value right now. There's some people that may be abandoning very good names in the growth space that have excellent fundamentals just based on the broad impact of growth investing and interest rates. And so as we look at the period that we're going through, I think patience is really important and having discipline around trying to avoid selling too quickly on a market correction or maybe reflexively buying a dip when there may be more room for a correction.

Dan: I should point out that we've challenged our investment teams to discuss the implications of this rotation in markets in their areas of expertise. In the report that we shared, they framed their commentary based on what our investors are asking us in their field. We get asked about our views on policy and the macroenvironment, how to find growth, how to find income, and what we're doing in the world of sustainable investments and about better ways to invest retirement assets. We thought it's very important to frame this in the report by focusing specifically on areas of the greatest concerns that investors have.

Kelly: Taking all of this into account and the insights you shared so far today, how do you take your own views as CIOs and challenge the inevitably varying views, or what we call Allview, across the investment organization? Jon, I'll start with you.

Jon: Thanks, Kelly. Dan and I absolutely have our own views on the market and what we think might be the best course of action. But I think you really put your finger on it. There's a lot of opinions and views and we've hired some of the best people in the business at Allspring to bring their own views to our investors. And so part of our effort to bring Allspring to the market as an independent entity is that we consciously choose to organize our research teams under the name of Allview and, to me, this name captures how we think about the free flow of ideas among investment teams and really trying to unpackage unique insights that might benefit our investors. And so, they're the experts. Allview gives them the platform to manage their strategies with autonomy and provide the insights and we provide the guidance and structure in how they execute.

Dan: Yeah, I agree 100% with that, Jon. I think as a matter of course in this business, there's a lot of disagreement among some very smart people on the risks and opportunities in the marketplace. And to me, this is one of the most fascinating parts of our jobs. Take inflation, right? If you present the same information to different experts, they'll often arrive at different answers. They'll source from different data. They'll take different inferences from that data. They don't have to agree and we don't force agreement to get consensus or come up with a house view. In fact, we think that is a clear mark of differentiation from our competitors and how we run our business. Ultimately, I think this accrues to the benefit of our investors, who have hired a certain expertise among our various teams.

Kelly: Wow, this really brings Allview to life and it's very exciting to hear what Allview means to you both and what we believe it could mean for our investors. One final question before we close. If there's one thing you think investors should be doing right now as they look at their portfolios, what would it be? Jon?

Jon: Kelly, I mentioned the rotation earlier in the podcast that we're going through in the markets and we're really at an inflection point right now after years of significant stimulus and central bank action that's provided a backstop for risk assets. And so as we enter into a new regime of higher interest rates, I think the most important thing that a client can do is just take a step back and assess the risk in the portfolio relative to a rising rate environment or an equity market that has significant valuations.

Kelly: Dan?

Dan: Now Kelly, this isn't a house view, but I'm going to say something very similar to Jon here. So I think the impacts of rates and duration and inflation in a portfolio, exactly as Jon described, and I think the one element I would add is look at the correlation between those and other risk assets. Because this is a new regime and a regime shift and the correlations that people have seen in the past may not unfold as they expect in the future. So spending more time to understand those risks, I think can set investors up for success looking forward.

Kelly: Dan, Jon, thank you so much for being with us today and sharing your insights.

Dan: Thank you, Kelly. It was a great pleasure to be with you.

Jon: Thank you, Kelly. It's great to be with you, as well.

Kelly: That wraps up this episode of On The Trading Desk®. If you'd like to read more market insights and investment perspectives from Allspring Global Investments, you can find them at our firm's website, allspringglobal.com. To stay connected to On The Trading Desk® and listen to past and future episodes of the program, you can subscribe to the podcast on Apple Podcasts, Spotify, Google Podcasts, or whatever podcast subscription you may use. Until next time, I'm Kelly Vives and thank you for listening.

US PAR-0122-00855
EMEA PAR-0122-00871

Podcast: Taking an Allview Approach. Different by Design.

On the companion podcast, co-Chief Investment Officers Jon Baranko (Fundamental) and Daniel Morris (Systematic) discuss how the Allview approach of not enforcing a “house view” is a differentiator and part of our cultural fabric. Diverse perspectives allow our portfolio managers to have different outcomes and risk aversions.

Allview: Unique Viewpoints Delivered Together as One

Announcer: Welcome to the Allspring Global Investments podcast where we explore what's happening in the markets and discuss our outlook for the ever-changing investment landscape. Thought leaders provide their views on the latest global trends in sustainability, technology, emerging markets, and more. Join us as we take you down the road of investing elevated.

Kelly Vives: Welcome to On the Trading Desk®. I'm Kelly Vives, chief marketing officer of Allspring Global Investments.  Today, I'm joined by Jon Baranko, chief investment officer of Fundamental Investments, and Dan Morris, chief investment officer of Systematic Investments. I'm excited to share with you that we've recently released our 2022 Insights report, titled The More Things Change, the More They Stay the Same. We discuss current market factors that are shaping our outlook for 2022 as well as an introduction of our Allview investment approach. I encourage our listeners to check out this report on allspringglobal.com. Jon, Dan, thank you so much for joining me.

Jon Baranko: It's great to be here, Kelly.

Dan Morris: Thanks, Kelly.

Kelly: Let's reflect on 2021 and where we are today. What are some of the key market developments that you would highlight? Jon, can you start us off?

Jon: Sure, happy to. It's been an amazing few years since the pandemic took hold of the economy. And as we look at the fiscal and monetary stimulus that's provided a lot of tailwinds in the economy, it's really provided a backstop for risk assets globally. And so the effects of all that have been to really accelerate the stimulus and the economy, really accelerate technology and productivity's impact on our lives and that's translated into strong earnings and in markets through 2021.

And so as we came through 2021 and have really seen that the impact of that has been quite successful, there has been a side effect of that that is affecting the economy and spreading out into the economy, and that's inflation. It seems like everyday goods, like food and gas and clothing, the prices have shot higher and we're seeing inflation running close to 7% as we enter 2022. So this is going to have a big impact on both Congress' and the Fed's [Federal Reserve] ability to impact their stimulus programs going forward. And so it's a pivot point here in the market and really a time for investors to take a step back and consider the impact of that and really probably the most dramatic effect of that, which is a change in the low interest rate environment that we've been in for decades.

Kelly: So I think it's fair to say we are in a constantly changing world and disrupted macroenvironment. Dan, how will these factors impact us as we look ahead to 2022?

Dan: I agree with Jon's assessment. Interest rates are really a core component of pricing across global capital markets. If we are heading higher in interest rates and the markets begin to price in higher long-term inflation expectations, I think we're going to begin to see certain factors there that have benefited most from a low-rate environment back up a little bit. Other areas, like value stocks or inflation-sensitive assets, for example, might come into favor. If the dollar begins to weaken, you're probably going to see non-dollar-denominated assets coming into favor, too. The language we use to describe this reshuffling of values in the market is a rotation.

Kelly: Thanks, Dan. A lot to take in there. Jon, what's your view on how this rotation impacts investors?

Jon: Generally, we think the rotation's going to play out over a period of time. Much of the commentary of the markets right now as we go through the recent correction is focused on the immediate impacts of what's going to happen, especially in a period like we're going through now with the volatility. And so I think it's equally important for investors to think about some of the intermediate- to longer-term implications. And the market has a lot of head fakes. It causes people to temporarily abandon the long-term strategic asset allocation and now is a time for really patience and discipline. A good example of this is the rotation into value right now. There's some people that may be abandoning very good names in the growth space that have excellent fundamentals just based on the broad impact of growth investing and interest rates. And so as we look at the period that we're going through, I think patience is really important and having discipline around trying to avoid selling too quickly on a market correction or maybe reflexively buying a dip when there may be more room for a correction.

Dan: I should point out that we've challenged our investment teams to discuss the implications of this rotation in markets in their areas of expertise. In the report that we shared, they framed their commentary based on what our investors are asking us in their field. We get asked about our views on policy and the macroenvironment, how to find growth, how to find income, and what we're doing in the world of sustainable investments and about better ways to invest retirement assets. We thought it's very important to frame this in the report by focusing specifically on areas of the greatest concerns that investors have.

Kelly: Taking all of this into account and the insights you shared so far today, how do you take your own views as CIOs and challenge the inevitably varying views, or what we call Allview, across the investment organization? Jon, I'll start with you.

Jon: Thanks, Kelly. Dan and I absolutely have our own views on the market and what we think might be the best course of action. But I think you really put your finger on it. There's a lot of opinions and views and we've hired some of the best people in the business at Allspring to bring their own views to our investors. And so part of our effort to bring Allspring to the market as an independent entity is that we consciously choose to organize our research teams under the name of Allview and, to me, this name captures how we think about the free flow of ideas among investment teams and really trying to unpackage unique insights that might benefit our investors. And so, they're the experts. Allview gives them the platform to manage their strategies with autonomy and provide the insights and we provide the guidance and structure in how they execute.

Dan: Yeah, I agree 100% with that, Jon. I think as a matter of course in this business, there's a lot of disagreement among some very smart people on the risks and opportunities in the marketplace. And to me, this is one of the most fascinating parts of our jobs. Take inflation, right? If you present the same information to different experts, they'll often arrive at different answers. They'll source from different data. They'll take different inferences from that data. They don't have to agree and we don't force agreement to get consensus or come up with a house view. In fact, we think that is a clear mark of differentiation from our competitors and how we run our business. Ultimately, I think this accrues to the benefit of our investors, who have hired a certain expertise among our various teams.

Kelly: Wow, this really brings Allview to life and it's very exciting to hear what Allview means to you both and what we believe it could mean for our investors. One final question before we close. If there's one thing you think investors should be doing right now as they look at their portfolios, what would it be? Jon?

Jon: Kelly, I mentioned the rotation earlier in the podcast that we're going through in the markets and we're really at an inflection point right now after years of significant stimulus and central bank action that's provided a backstop for risk assets. And so as we enter into a new regime of higher interest rates, I think the most important thing that a client can do is just take a step back and assess the risk in the portfolio relative to a rising rate environment or an equity market that has significant valuations.

Kelly: Dan?

Dan: Now Kelly, this isn't a house view, but I'm going to say something very similar to Jon here. So I think the impacts of rates and duration and inflation in a portfolio, exactly as Jon described, and I think the one element I would add is look at the correlation between those and other risk assets. Because this is a new regime and a regime shift and the correlations that people have seen in the past may not unfold as they expect in the future. So spending more time to understand those risks, I think can set investors up for success looking forward.

Kelly: Dan, Jon, thank you so much for being with us today and sharing your insights.

Dan: Thank you, Kelly. It was a great pleasure to be with you.

Jon: Thank you, Kelly. It's great to be with you, as well.

Kelly: That wraps up this episode of On The Trading Desk®. If you'd like to read more market insights and investment perspectives from Allspring Global Investments, you can find them at our firm's website, allspringglobal.com. To stay connected to On The Trading Desk® and listen to past and future episodes of the program, you can subscribe to the podcast on Apple Podcasts, Spotify, Google Podcasts, or whatever podcast subscription you may use. Until next time, I'm Kelly Vives and thank you for listening.

US PAR-0122-00855
EMEA PAR-0122-00871

Allspring’s “Big 5” for 2022

Which impactful areas do we think investors should focus on in 2022? This year, we’ve identified five global themes—how we think they will affect the macroeconomic landscape and how we are positioning as a result. Take a look at our subject matter experts’ views in these key areas.
Got inflation? A key risk on everyone’s mind recently has been inflation. What do our experts think, and how will inflation affect positioning for fixed income, equity, and multi-asset this year?
Read Now (PDF)
Got inflation? A key risk on everyone’s mind recently has been inflation. What do our experts think, and how will inflation affect positioning for fixed income, equity, and multi-asset this year? Read Now (PDF)

01

If 2020 was the year that brought us the pandemic, it was 2021 that saw some of the excesses and abnormalities created by policy, business, and consumer responses come to fruition. In 2022, we expect some of these to iron out and create conditions for stronger economic growth and moderating inflationary pressures. There remain several logjams in supply chains, but we are beginning to see signs of improvement in shipping and hear positive guidance from businesses about their ability to restock inventories to more normal levels and meet customer demand.

In 2022, we expect to see more diversity in central bank policy responses as pandemic extremes abate. A key question for each is whether policy changes are correct in both size and speed, striking a proper balance between growth and price stability. Some market observers think the Federal Reserve and the Bank of England are being too quick to hike—an about-face from being perceived as too slow in 2021—but we think policy is about right. The European Central Bank is taking a wait-and-see approach while Japan is not even close to policy tightening.

Many investors are concerned about pandemic-era government spending. While it’s higher than we’d like, many of these spending programs were needed to bridge the gap to normality. We think the direction in fiscal policy is getting better, and this is often what matters most to markets. For example, in the U.S., we are expecting the deficit to move from 12% of gross domestic product in 2021 to something closer to 5% this year as Congress trims President Biden’s original budget proposal. We see differences in fiscal policy across major Organisation for Economic Co-operation and Development (OECD) countries as well, ranging from relative constraint in European Union budgets to significant spending in Japan. All told, we think the return of diversity and normality across policy, consumer, and business activity will create significant investment opportunities in 2022.

Will policy divergence create opportunities in 2022?
The Global Central Bank policy divergence forecast.
:] Market-implied policy rate forecast around the globe, from December 2021 to December 2024:  •	U.S.: December 2021 begins at 0.13%, increasing to 1.37% by December 2023, and remaining at 1.42% through December 2024. •	Eurozone: December 2021 begins at -0.5%, remaining flat through June 2022, then increasing to -0.08% in December 2023, and ending slightly up at 0.03% in December 2024. •	U.K.: December 2021 begins at 0.25%, increasing to 1.29% by December 2022, then slightly declining and leveling off to end at 1.26% in December 2024. •	Japan: December 2021 begins at -0.02%, declining slightly to -0.05% by June 2022, increasing to 0.05% by December 2022, and slightly declining through December 2024, ending at -0.03%.
Source: Bloomberg; forecast as of December 24, 2021.

02

As we preview 2022, 10-year government bond yields are near historical lows for all sovereign issuers, yet they are positive in the U.S. and negative in Germany. Credit spreads are historically tight, but they vary greatly across the quality spectrum and among sectors and issuers. Income-seeking investors can comb through the exceedingly diverse bond universe to seek higher yields at acceptable levels of risk.

Investors can also manage their exposure to interest rate risk by carefully selecting maturities. Even cash investors have opportunities to preserve principal and add value by managing interest rate exposure and selecting attractive sectors and issuers. Managing these risks will become even more valuable as we approach liftoff in the federal funds target rate. Of course, markets often don’t react gradually—shocks can instantly reset relative-value opportunities in the market, allowing nimble investors to trade into bonds with a better expected reward/risk profile. Market dislocations create opportunities for active bond investors to reposition all the different levers of value creation to their advantage.

In this era of low yields, we’ve noted rumors that bonds can’t diversify equities anymore. The nature of diversification may have changed, but we believe bonds still diversify equities. This is particularly true during panics when diversification is most valuable. Historically, bond yields have gone lower during such episodes, whether speaking of negative-yielding German government bonds or positive-yielding U.S. Treasuries. Bonds are likely to remain a powerful portfolio diversifier and income generator.

Looking further into 2022, we expect that better economic growth and less monetary policy accommodation will help push rates higher, but moderating upside surprises in inflation expectations should temper any upward shift. Managing this push/pull dynamic will be instrumental to successful bond investing this year.

03

Decades of declining interest rates have helped elevate all types of risky assets to new heights. Most investors have enjoyed capital gains from both their equity and fixed income allocations over many years. But, with rates poised to move gradually higher in 2022 and beyond, what was once a tailwind for capital accumulation across a diversified portfolio may turn into a dampening force.

However, equities have unique properties that should allow them to continue to offer investors growth opportunities going forward. Unlike bonds, equities allow full participation in economic growth that we expect will continue in 2022 as pandemic-era excesses and distortions unwind. Our fundamental analysts closely examine the pricing power of individual companies and their ability to protect margins in the face of higher input costs. Moreover, companies with appropriate capital structures—the right mix of financing—can overcome the headwinds of higher rates. Not all companies can do this equally, so there will be winners and losers as the economy undergoes transformation. We think it’s important to highlight that fundamental analysis of these dynamics and proper security selection can help investors get the most out of their equity allocations. Active management has never been more important.

2020 was a year in which equity returns were driven by the market assigning higher valuations to corporate earnings. In 2021, we began to see earnings growth become a more important driver of equity returns, and we think this trend will continue in this year and moving forward. Importantly, we expect considerable dispersion in the markets globally. Country, sector and of course, company-specific factors will play a role. Above all, we believe being nimble with asset allocation decisions and selecting proven active equity managers who can position your portfolio to participate in the market’s recalibration will be critical to adding value in 2022.

04

One unifying idea behind retirement investing, irrespective of where specific investors sit along the spectrum of asset accumulation and decumulation, is that every retirement investor needs a mix of growth, income, and capital preservation that meets their unique circumstances. Half of the Baby Boomer generation is now retired and, by 2030, the vast majority will be taking distributions for consumption. A strong retirement program today prepares for tomorrow by offering tools and products to meet investors' changing needs as they mature and as market conditions evolve.

Looking forward, we note a growing preference for active fixed income to improve expected return generation of income-producing assets. Retirement plan menus might begin to expand with climate-transition-focused investments, an area likely to gain traction. Meanwhile, defined contribution offerings—whether target date, diversified growth, or others—can evolve to address the risk that higher asset correlations could erode the natural hedging properties between stocks and bonds. Finally, plan features should improve their ability to customize, aggregate, and automate.

A central concept in plan design is helping retirement investors manage the tradeoff between two principal risks: the ride, or volatility along the retirement journey, and the results, or the chance of failing to meet required returns and/or outliving one’s assets. We believe product lineups should include annuities to help balance these risks and enhance the potential of improving both the ride and the results. Moreover, retirement planning must account for the location of assets and return streams that sit outside of designated retirement plans, paying greater attention to taxes. Investors will increasingly think about what they want to own and where they should own it. In short, retirement needs to get smarter, and Allspring is constantly evolving its products, features, and execution to help meet the challenges of retirement planning.

Fixed income is a staple in 401k plans
To reduce risk and generate income potential, near- and in-retirement participants tend to allocate to fixed income.
401k investment allocation in fixed income generally increases as ages increase. Age groups in this chart show allocations to fixed income investments as follows: 20s: 19%; 30s: 15.6%; 40s: 19.6%; 50s: 29.5%; 60s: 38.8%.
Source: 401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2018, EBRI Issue Brief no. 526; and ICI Research Perspective, vol. 27, no. 2, March 2021.

05

In the past several years, we’ve seen the topic of sustainability gain a new prominence in conversations about the future—whether speaking about the role of government policy, business strategy, or the way individuals consume and invest. Some aspects of these changes are visible and immediate while others are over the horizon. One thing is clear for us as stewards of investors’ capital today: If you aren’t sustainable, it’s going to be very hard to grow.

We are excited to be an active part of this new paradigm. Our sustainable investing initiatives are designed to recognize and understand the issues important to investors today and tomorrow. For the companies we research and own, we assess not only current risk profiles and the healthiness of near-term earnings, but also whether the company is making the right strategic decisions to reduce its impact on the environment; treat customers, employees, and its community fairly; and operate with transparency and accountability toward the investing public. This future orientation is essential to protecting a company’s earnings when we expect sustainability themes to gain even more influence on enterprise value.

Looking at 2022 and beyond, the pursuit of net-zero carbon emissions has taken on a new urgency, with governments setting policies aligned to climate goals and companies increasingly implementing strategies to compete in a decarbonizing world. Our assessment of carbon emissions and fundamental examination of climate transition readiness complements our proprietary environmental, social, and governance (ESG) risk scoring methodology that evaluates a company’s management of sector-specific, material ESG risks. We think this research edge will help us manage portfolios more effectively and give clients more transparency into their investments.

Will actions follow ambitious climate crisis response?
Greater than 1,000 companies worldwide have set ambitious 1.5°C and net-zero aligned targets in the past two years.
The number of companies participating in 1.5◦C and net-zero targets from September 2019 to November 2021 are as follows: September 2019: 28; December 2019: 117; June 2020: 237; September 2020: 294; December 2020: 360; April 2021: 526; November 2021: 1045.
Source: Science Based Targets, Business Ambition for 1.5°C Status Report.

DISCLOSURES: All investing involves risks, including the possible loss of principal. There can be no assurance that any investment strategy will be successful. Investments fluctuate with changes in market and economic conditions and in different environments due to numerous factors, some of which may be unpredictable. Each asset class has its own risk and return characteristics.

Annuities are not offered by any Allspring entity.

Investing in environmental, social, and governance (ESG) carries the risk that, under certain market conditions, the investments may underperform products that invest in a broader array of investments. In addition, some ESG investments may be dependent on government tax incentives and subsidies and on political support for certain environmental technologies and companies. The ESG sector also may have challenges such as a limited number of issuers and liquidity in the market, including a robust secondary market. Investing primarily in responsible investments carries the risk that, under certain market conditions, an investment may underperform funds that do not use a responsible investment strategy.