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Mid Cap Growth Fund —
The U.S. equity market reached record highs in the second quarter
2nd Quarter, 2017
"We remain optimistic on the prospects for growth in the U.S. and across the globe. "
– Wellington Management Company LLP

During the second quarter of 2017, U.S. equities posted positive results for the seventh consecutive quarter. Declining oil prices, heightened political risk, and a rate hike from the Federal Reserve (Fed) were not enough to derail the eight-year-old stock market rally. The S&P 500® Index closed at a series of record highs during the quarter. In a well-telegraphed move, the Fed hiked policy rates by 25 basis points in June and laid out a plan for balance-sheet normalization later this year, provided the economy improves as broadly as anticipated. Volatility ticked up near the end of the quarter as investors gravitated back to the reflation trade, triggering rotations out of momentum and growth plays and into cyclical and value pockets of the market.
Growth stocks outperformed value stocks during the quarter across all market caps. The Harbor Mid Cap Growth Fund returned 9.21% during the second quarter of 2017, outperforming its benchmark, the Russell Midcap® Growth Index, which returned 4.21%. That compared to a 1.37% return for the Russell Midcap® Value Index. The Information Technology sector contributed to relative performance, due to stock selection and an overweight position. The Consumer Discretionary sector also benefited relative results, due to security selection and an underweight position. In contrast, the Energy sector hindered relative performance, due to an overweight position and stock selection. Stock selection in the Financials and Industrials sectors also detracted.
Wellington Management Company’s comments were made in a July, 2017 report. Highlights adapted from the report appear below. All comments relate to the quarter ended June 30, 2017, unless otherwise indicated. All references to the year-to-date are for the period January 1 through June 30, 2017.

Interview Highlights

The Market Environment Was Conducive to Our Style of Investing
The macro environment during the second quarter of 2017, much like during the first quarter, was conducive to our style of investing, as high growth stocks outperformed low growth stocks. U.S. mid cap equities posted positive results for the seventh consecutive quarter. Despite many investors voicing concerns about stretched valuations and overly optimistic policy expectations, the U.S. market continued its rally from the first quarter and hit a series of record highs. We have continued to see a broadening opportunity set and are finding growth across sectors, particularly in areas of the market where we have not been invested in the recent past.
We Have Increased Exposure to Information Technology and Health Care
Our sector allocations are a result of our fundamental stock selection process and are an indication of where we are finding the most attractive investment opportunities. Since the beginning of the year, we have increased exposure to the Information Technology and Health Care sectors, and we have decreased exposure to the Energy and Financials sectors.
We Remain Optimistic on the Prospects for Growth
We have not materially changed our outlook on the global macro environment. We remain optimistic on the prospects for growth in the U.S. and across the globe, and we have continued to identify opportunities across sectors and pockets of the market that display acceleration of earnings growth. Our portfolio is a collection of best ideas that we believe can generate alpha in various market environments, and we continue to use our bottom-up investment process to uncover companies that fit our investment criteria.

Performance data shown represents past performance, which is no guarantee of future results. Current performance may be higher or lower than the past performance data shown. Investment returns and the value of an investment will fluctuate, and an investor's shares, when sold, may be worth more or less than their original cost. You can obtain performance data current to the most recent month-end (available within seven business days after the most recent month-end) by calling 800-422-1050 or visiting

Performance figures discussed reflect that of the institutional class shares.

The views expressed herein are those of the portfolio manager at the time of the interview and may not be reflective of their current opinions or future actions.  These views are not necessarily those of the fund company and should not be construed as such.

This information should not be considered as a recommendation to purchase or sell a particular security and the holdings or sectors mentioned may change at any time and may not represent current or future investments.