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Investment Outlook

2025 Q4 outlook: Alternate routes: The Fed’s moves and implications for stocks, bonds and beyond

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Key takeaways

 

Explore the investment outlook by section

Section 1: Alternate routes: The Fed’s moves and implications for stocks, bonds and beyond

Saira Malik, Chief Investment Officer

Yogi Berra, Robert Frost and the Cheshire Cat, among other real and imaginary luminaries, all offered memorable wisdom about roads and which ones to follow. Though their words are often adapted so loosely that they barely resemble their original form, the underlying themes endure — from “If you come to a fork in the road, take it” to “Two roads diverged…and I took the one less traveled by” to “If you don’t know where you’re going, any road will take you there” (a nowhere-near-verbatim inference based on what Lewis Carroll’s grinning cat told Alice when she asked which way to go in Wonderland).

Diversified, long-term investors face the ongoing task of assessing which asset classes and allocation strategies are most likely to put them on the road to successful portfolio outcomes. The path is typically neither static nor in a frenzied flux over long periods, but instead tends to wind through an evolving economic and market landscape shaped by cyclical and secular forces.

Of course, the road is always subject to potential disruption and detours. That’s certainly been true in 2025, a year of sometimes volatile, unpredictable — and even unprecedented — change. Markets are approaching year end after resolving one of the biggest uncertainties (When will the Federal Reserve begin cutting rates?) and other questions still lingering (What will the Fed’s easing path look like for the remainder of 2025 and in 2026?).

The pace and scope of further rate reductions, whether a swift sprint or a cautious crawl, could drive divergent results for asset classes in the near to medium term. With that in mind, we would caution against being too risk averse, as conservative bonds on their own, for example, are unlikely to capture the range of opportunities available in the current environment. Staying on the sidelines holding large amounts of cash, rarely a winning long-term strategy, looks even less productive with interest rates now on a downward path. At the same time, overexposure to equities without a focus on fundamentals or meaningful acknowledgment of risks (such as stretched valuations and lack of market breadth) may also be problematic.

If neither purely traditional fixed income and cash at one extreme nor overly equity-centric approaches at the other are optimal portfolio strategies, where do we see the most compelling opportunities? Our “Five themes for 2025” section provides an overview of our preferences and accompanying rationales for non-U.S. Treasury taxable fixed income sectors like securitized assets, senior loans, emerging markets debt and private credit; municipal bonds; commercial real estate; U.S. large cap stocks; and energy-related global infrastructure assets.

Our asset allocation heat map and best investment ideas within asset classes provide additional detailed perspective. It’s worth noting that selectivity and thoughtful portfolio construction are as critical to our outlook as the principle of broad diversification, as not all roads lead to Rome (or to winning investment performance). That’s why, in keeping with our theme of alternate routes, a number of our chosen asset classes — including real estate, global infrastructure and private credit — are somewhat off the beaten path.

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The U.S. economy decelerated in 2025, with first-half growth averaging a 1.4% annualized pace, half of 2024’s robust 2.8% expansion.

The economy and markets
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Our cross-asset class views indicate where we see the best relative opportunities within global financial markets.

Asset class heat map
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It’s clear for global, multi-asset investors that the path has unfolded quite differently from initial 2025 expectations. Our five themes cover this and more.

Five themes for 2025
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It’s clear for global, multi-asset investors that the path has unfolded quite differently from initial 2025 expectations. Our five themes cover this and more.

Best ideas across asset classes
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Endnotes

Sources

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

This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or an investment strategy, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her financial professionals.

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

Nuveen, LLC provides investment advisory services through its investment specialists.

This information does not constitute investment research as defined under MiFID.

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