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Investment Outlook

Portfolio construction themes

Global Investment Committee
Nuveen’s Global Investment Committee (GIC) brings together our most senior investment leaders from across the firm.
Plants growing out of pavement cracks

Section 2

Navigating today’s investment landscape has become tougher, as widening cracks in the economy present tripping hazards or cause investors to stray from their long-term path. Growth is weakening, inflation remains sticky and interest rates are stranded on a higher-for-longer plateau. But we see a way forward amid these obstacles: taking on selective risks, pursuing optimal diversification strategies and leaning into emerging opportunities as economic and financial market conditions evolve. The going may not be easy, but we offer multiple portfolio construction themes and asset class ideas designed to help investors traverse the shifting terrain to generate returns and manage risks.

Asset class “heat map”

Our cross-asset class views indicate where we see the best relative opportunities within global financial markets. These are not intended to represent a specific portfolio, but rather to answer the question: “What are our highest-conviction views when it comes to putting new money to work?” These views assume a U.S. dollar-based investor seeking long-term growth and represent a one-year time horizon.

Asset class heat map

Key portfolio themes

Figure 1: Higher yields create compelling options across fixed income markets

In focus: Municipal bonds look solid

There’s a lot to like about municipal bonds: They offer compelling income (especially for investors capitalizing on after-tax returns), feature solid credit fundamentals and enjoy a strong technical backdrop.

As the year progresses, we expect short-term rates to fall slightly and the municipal yield curve to steepen — this speaks to the benefit of adopting a longer duration for munis. And even without the prospect of a tailwind from a shifting rates environment, municipal bond yields are historically high, meaning current income should help generate attractive returns even without declining rates or spread compression.

We also believe that taxable municipals appear attractive for non-U.S. investors, institutions or others focused on this market segment. Spreads are attractive compared to other areas of the global fixed income market, and fundamentals remain very healthy

Our highest-conviction views:

Infrastructure (+) offers the dual benefits of potentially holding up well amid prospects for slowing economic growth and weathering still-high inflation. Both public and private infrastructure look compelling, and we are especially fond of the public sphere.

Private credit (+) continues to look attractive, with high investor demand and strong fundamentals. We continue to prefer more resilient areas such as health care, software and insurance brokers that are relatively well positioned to withstand economic downturns.

Municipals (+) should see ongoing tailwinds from high demand and solid fundamentals. Munis have also recently been growing less expensive relative to Treasuries and their own history.

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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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