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Investment Outlook

Best ideas across asset classes

Global Investment Committee
Nuveen’s Global Investment Committee (GIC) brings together our most senior investment leaders from across the firm.
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Asset class outlooks

 

Equities

Saira Malik

Best ideas

 

Investment positioning

A combination of global economic resilience and strong corporate earnings has propelled equity markets higher over the first half of 2024. This upward move has been accompanied by less favorable valuations, which (combined with uncertainty surrounding central bank policy) leads us to stick with a neutral view toward global stock markets. Overall, we favor a focus on higher-quality segments, leaning toward industries and geographic regions that offer both fundamental and valuation tailwinds. Likewise, we have a less positive view toward areas with a higher degree of economic or interest rate sensitivity.

In the U.S., we prefer large caps over small (which tend not to do as well when economic growth is slowing). And we see particular opportunities in industries that can benefit from the AI boom. Our sector focus areas include energy (strong supply/demand dynamics) and technology (specifically software and semiconductors, which should be resilient amid slowing growth).

Outside of the U.S., we think Japanese equities look compelling: Japan is finally emerging from its decades-long battle with deflation. And while the BOJ is slowly raising rates, Japanese monetary policy remains among the most accommodative in the world. Select emerging markets that feature relative value and improving earnings also look attractive, including China where the rebounding economy creates a tailwind.

Private equity markets continue to struggle, but we still see investor interest that could drive more deal activity

 

Fixed income

Anders Persson

Best ideas

 

Investment positioning

Fixed income markets overall appear very attractive. Inflation is slowly easing across most geographies, and global central banks are (for the most part) slowly moving toward more accommodative policy. We don’t expect dramatic rate declines, but believe bond yields should move modestly lower throughout the second half of 2024. Importantly, even if rates remain elevated, current yields still offer compelling income.

As the threats of higher inflation and interest rates wane, we think it makes sense to move closer to a neutral duration. If central banks start cutting rates more aggressively than we expect, investors may want to consider moving to a longer duration position, but we don’t think that is likely near-term. Attractive yields and opportunities for additional total return as longer-term rates decline also mean that investors holding excess cash would do well to consider reallocating to fixed income.

One important caveat to our view: We think it makes sense to adopt a longer-duration stance in municipals. The muni bond yield curve is significantly steeper than the U.S. Treasury curve, which provides the potential for current income as well as total returns when and if rates do decline.

We have been advocating a focus on flexibility and diversification across credit sectors, as we see solid opportunities across global fixed income markets. Within that context, we are less positive toward investment grade bonds given recent strong performance and tight spreads. In contrast, we favor the relatively higher quality areas of senior loans and collateralized loan obligations, which feature strong fundamentals and should continue to benefit from the higher-for-longer theme. We also like preferred securities that benefit from a solid issuer base and emerging markets debt investments that feature improving credit quality.

Municipal bonds feature strong fundamentals (solid credit ratings and high levels of cash) and attractive supply/demand dynamics. We see significant opportunities in taxable municipals for non-U.S. investors, and we are focused on the high yield and specialty- and property-tax-backed areas of the muni market. 

We also remain constructive toward private credit markets, especially if we only experience a mild slowdown or shallow recession.

 

Real estate

Carly Tripp

Best ideas

 

Investment positioning

We continue to see positive signals increase for private real estate. The stiff technical headwinds that have been holding the asset class back for an extended period are fading. Most global rate increases are in the rearview mirror, and rate cuts are on the horizon – a plus for private real estate. Additionally, there is more clarity around pricing, and the spot market has stabilized. At the same time, investor demand is rising: Commercial real estate lending is growing, overall liquidity is improving and, in general, most investors are no longer overweight private real estate.

The U.S. office sector will likely remain challenged given high vacancy rates, but we see broad opportunities across residential, industrial and alternative real estate. Areas like medical office and senior housing look compelling, as they should benefit from long-term demographic trends.

A more stable rate environment (and prospects for cuts), as well as strong pricing power on the part of lenders, continues to support overweighting private real estate debt over equity; we would consider private real estate equity as a “hold” position.

Real assets

Justin Ourso

Best ideas

 

Investment positioning

Public infrastructure investments appear especially compelling, as they benefit from still-elevated inflation and have minimal sensitivity to interest rates. Additionally, the essential-service nature of these companies means they should be able to weather slowing growth. Our most favored areas include data centers (capitalizing on the AI boom), North American utilities (compelling value with highly visible growth) and energy (strong balance sheets and solid earnings prospects). In contrast, we see some risks in European utilities that could be hurt by potentially lower power prices.

We also have a favorable view toward public real estate. Valuations, fundamentals and earnings prospects all look fair to positive, and we expect real estate will benefit when interest rates start to decline. We are seeing particular value in health care (specifically senior housing and medical office), data centers and select convenience retail and grocery-centered shopping complexes that should be able to withstand slower economic growth.

We also see opportunities across private real assets. Within infrastructure, we are focused on capitalizing on two key trends: ongoing digitization, particularly the rapid growth of AI-driven data centers, and clean energy transition, with a focus on electrification. We also see opportunities in agribusiness investments, including investments that focus on food ingredient processing that can reduce in-store labor at quick-serve restaurants (a growing area of the market).

We also remain positive toward farmland as a long-term investment. Farmland tends to be relatively well insulated from both macroeconomic factors and geopolitical risks, which can create diversification benefits. While row crop margins and profits have been declining, they remain above their historic average, and land values continue to increase. 

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All market and economic data from Bloomberg, FactSet and Morningstar.

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 and there is no assurance that an investment will provide positive performance over any period of time. Equity investing involves risk. Investments are also subject to political, currency and regulatory risks. These risks may be magnified in emerging markets. Diversification is a technique to help reduce risk. There is no guarantee that diversification will protect against a loss of income. 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. Investing in municipal bonds involves risks such as interest rate risk, credit risk and market risk, including the possible loss of principal. The value of the portfolio will fluctuate based on the value of the underlying securities. There are special risks associated with investments in high yield bonds, hedging activities and the potential use of leverage. Portfolios that include lower rated municipal bonds, commonly referred to as “high yield” or “junk” bonds, which are considered to be speculative, the credit and investment risk is heightened for the portfolio. Credit ratings are subject to change. AAA, AA, A, and BBB are investment grade ratings; BB, B, CCC/CC/C and D are below-investment grade ratings. As an asset class, real assets are less developed, more illiquid, and less transparent compared to traditional asset classes. Investments will be subject to risks generally associated with the ownership of real estate-related assets and foreign investing, including changes in economic conditions, currency values, environmental risks, the cost of and ability to obtain insurance, and risks related to leasing of properties. Investors should be aware that alternative investments including private equity and private debt are speculative, subject to substantial risks including the risks associated with limited liquidity, the use of leverage, short sales and concentrated investments and may involve complex tax structures and investment strategies. Alternative investments may be illiquid, there may be no liquid secondary market or ready purchasers for such securities, they may not be required to provide periodic pricing or valuation information to investors, there may be delays in distributing tax information to investors, they are not subject to the same regulatory requirements as other types of pooled investment vehicles, and they may be subject to high fees and expenses, which will reduce profits. Alternative investments are not appropriate for all investors and should not constitute an entire investment program. Investors may lose all or substantially all of the capital invested. The historical returns achieved by alternative asset vehicles is not a prediction of future performance or a guarantee of future results, and there can be no assurance that comparable returns will be achieved by any strategy. Responsible investing incorporates Environmental Social Governance (ESG) factors that may affect exposure to issuers, sectors, industries, limiting the type and number of investment opportunities available, which could result in excluding investments that perform well.

Nuveen, LLC provides investment solutions through its investment specialists.

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