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Equities
Global equity markets seek fresh catalysts
Global equities posted mixed results in the second quarter of 2024. Emerging markets (EM) stocks led the way after lagging in the prior quarter, driven by China’s strong performance, followed closely by the S&P 500 Index. In contrast, non-U.S. developed markets produced negative returns, dragged down by Japan. Investors were cautious, looking for broader earnings growth and dovish cues from central banks. The European Central Bank (ECB) cut rates, while the Bank of England (BoE) signaled that easier monetary policy may be forthcoming later this summer. In the U.S., the Federal Reserve tempered expectations for lower rates, projecting just one likely cut in 2024. The Bank of Japan (BoJ), which raised rates in March, continued to pursue tighter monetary policy, announcing plans to scale back its monthly bond buying program.
Key takeaways
- Disinflationary trends during the quarter helped lower inflation closer to central bank targets, although only the ECB actually cut rates. China, meanwhile, made progress in its battle against deflation, with consumer prices rising throughout the period.
- We anticipate that the U.S. economy will continue to decelerate over the balance of the year. The slowdown is evident in the data on several fronts: Consumer spending has waned, manufacturing activity is contracting, the housing market remains weak and first-time unemployment claims have been edging up.
- Given our relatively cautious outlook, we favor (1) defensive areas like U.S. large cap stocks (especially dividend growers) and infrastructure; (2) exposure to specific EM opportunities in countries like India; and (3) attractively valued small and mid cap names in Japan.
- On balance, we still generally prefer U.S. over non-U.S. equities for their better defensive characteristics in case of a global economic slowdown. Recently, however, we have become more comfortable with reducing our U.S. overweight and shifting some assets into both developed and emerging non-U.S. markets.
- Within the U.S., we’re not yet prepared to upgrade our view on small cap stocks, although they are currently priced well below their longterm average and may offer select opportunities.
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Endnotes
The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Performance data shown represents past performance and does not predict or guarantee future results. Investing involves risk; principal loss is possible.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. For term definitions and index descriptions, please access the glossary on nuveen.com. Please note, it is not possible to invest directly in an index.
Important information on risk
All investments carry a certain degree of risk, including possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time. Equity investments are subject to market risk or the risk that stocks will decline in response to such factors as adverse company news or industry developments or a general economic decline. Debt or fixed income securities are subject to market risk, credit risk, interest rate risk, call risk, tax risk, political and economic risk, and income risk. As interest rates rise, bond prices fall. Non-U.S. investments involve risks such as currency fluctuation, political and economic instability, lack of liquidity and differing legal and accounting standards. These risks are magnified in emerging markets. This report should not be regarded by the recipients as a substitute for the exercise of their own judgment. It is important to review your investment objectives, risk tolerance and liquidity needs before choosing an investment style or manager.
Past performance is no guarantee of future results. There are risks inherent in any investment including, but not limited to, interest rate risk, credit risk, market risk and the possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time. Certain products and services may not be available to all entities or persons. There is no guarantee that the Fund's investment objectives will be achieved. See the applicable product literature for details.
Economic and market forecasts are subject to uncertainty and may change based on varying market conditions, political and economic developments. This report should not be regarded by the recipients as a substitute for the exercise of their own judgment. It is important to review your investment objectives, risk tolerance and liquidity needs before choosing an investment style or manager.
Equity investments are subject to market risk or the risk that stocks will decline in response to such factors as adverse company news or industry developments or a general economic decline.
Non U.S. investments involve risks such as currency fluctuation, political and economic instability, lack of liquidity and differing legal and accounting standards. These risks are magnified in emerging markets.
Debt or fixed income securities are subject to market risk, credit risk, interest rate/duration risk, call risk, tax risk, political and economic risk, and income risk. As interest rates rise, bond prices fall. Credit risk refers to an issuers ability to make interest and principal payments when due.
Nuveen, LLC provides investment solutions through its investment specialists.
This information does not constitute investment research as defined under MiFID.
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