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Weekly CIO Commentary

Catalysts to quell volatility — what, how and when?

Saira Malik
Chief Investment Officer
Saira Malik, Chief Investment Officer

Bottom line up top

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Volatility may remain elevated, but we’re looking for fundamental signals that could point to more market stability.

CIO weekly commentary chart 1

Portfolio considerations

Within equities, we prefer a defensive tilt toward dividend growers. Historically they have outperformed the broader U.S. equity market during Fed rate hiking cycles (Figure 2) and in periods of heightened volatility.

As we’ve seen throughout 2022, duration assets have failed to provide a cushion against risk-off market declines. But we think it’s still too early to increase exposure to interest-rate sensitivity, as the Fed has only recently embarked on its hiking cycle. Additionally, in periods of higher inflation, core bonds have typically struggled to generate real returns. Within credit, yields have improved substantially. High yield is once again high yielding at around 7.5%, and spreads are relatively attractive versus history. And while the recent widening reflects increased perceived risks in the economy, it also offers a potential buying opportunity (and a yield cushion if markets sour further). Overall, we see strong fundamentals across corporate sectors, but in the below-investment grade space we believe it’s prudent to stay up-in-quality (BBs).

Tax-sensitive investors can still take advantage of dislocations in the municipal bond market. At the front end of the muni curve, yields are the highest they’ve been in years, and at the long end, muni/Treasury ratios exceed 100%.

CIO weekly commentary chart 2

Nuveen’s Global Investment Committee (GIC) brings together the most senior investors from across our platform of core and specialist capabilities, including all public and private markets.

Regular meetings of the GIC lead to published outlooks that offer:

Related articles
Investment Outlook CIO commentary archive
Access previous issues of Saira Malik’s weekly CIO commentary on strategy and portfolio construction.
Weekly Fixed Income Commentary Treasury yields decline over growth concerns
U.S. Treasury yields rose again despite last week’s Federal Reserve meeting, at which the central bank hiked rates by 50 basis points.
Investment Outlook A steeper and more perilous climb for the Fed
Brian Nick discusses the March Fed meeting and offers Nuveen's outlook on a steeper and more perilous climb for the Fed.

Endnotes

Sources

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. Past performance is no guarantee of 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.

A word 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.

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