Laying the groundwork for a less bumpy ride

Bottom line up top:

• Tariffs and the courts: permanent road closure or temporary detour? Market optimism following last Wednesday’s tariff-toppling decision by the U.S. Court of International Trade proved fleeting. Although the court blocked most of the Trump administration’s Liberation Day levies on the grounds that the president lacked authority to impose them, the tariffs were reinstated by the U.S. Court of Appeals for the Federal Circuit. This potentially sets the stage for a showdown and definitive ruling at the U.S. Supreme Court.

• Tempering the tariff trauma. This latest turn in the ongoing saga of “now you see them, now you don’t” tariffs could disrupt what has been a nearly V-shaped recovery for the S&P 500 Index since it tumbled nearly 19% from its all-time high in February. Fortunately, last week’s Conference Board’s Consumer Confidence Index brought some encouraging news. This index rebounded dramatically by more than 12 points in May, to 98.0, after falling for five months in a row. While consumers are still concerned about the inflationary impact of tariffs, their inflation expectations for the coming year declined (Figure 1). And last Friday’s release of the Personal Consumption Expenditures (PCE) Price Index for April showed consumer inflation remaining tame. Thanks in part to falling gasoline prices, headline PCE came in at 2.1% on a year-over-year basis, down from 2.3% in March and at its lowest since September 2024. Core PCE, which excludes the volatile food and energy components and is the U.S. Federal Reserve’s preferred inflation barometer, was also slightly cooler at 2.5% year-over-year in April, versus 2.7% in March.
  
  Looking ahead, continued economic, geopolitical and trade uncertainty will likely mean that any rally in equity markets will be punctuated by periods of heightened volatility. Investors may be able to smooth the bumpy ride by diversifying their portfolios with investments like global infrastructure assets, which historically have offered a compelling combination of downside risk mitigation, inflation protection and income.

Portfolio considerations

What’s big tech got to do with it? Mega cap technology companies have staged a notable recovery of late, with the Magnificent Seven stocks collectively gaining more than 26% from their post-Liberation Day trough in April. This rally has been underpinned by earnings resilience and continued outsized capital commitments to artificial intelligence (AI). Some of the world’s largest tech names — Meta, Amazon, Alphabet and Microsoft — have announced plans to spend in excess of $300 billion in 2025 on AI and the data centers necessary to support its expansion. Data center construction alone may have contributed a full percentage point to U.S. GDP growth in the first quarter of 2025, according to some estimates.

Owning shares in the global leaders of AI development remains a high-conviction idea for many equity investors, resulting in premium valuations. But there are ways to build exposure to the AI growth story at more attractive prices while limiting sector concentration risks. Investing in publicly listed global infrastructure offers a particularly compelling opportunity. Infrastructure is an asset class long known for its defensive characteristics, such as its ability to potentially outperform broader equities during periods of negative returns. It is also uniquely positioned to benefit from the AI boom and the continued electrification of the global economy. In addition to data centers, areas of infrastructure such as midstream pipelines, gas and electric utilities, and electricity transmission are critical to generating and sustaining the energy necessary to power rapidly evolving technologies and to meet the needs of communities in which these systems and facilities are located.

Some historical context is helpful in understanding where demand for power may be headed. Over the past 25 years, the U.S. has seen only tepid growth in power demand, largely due to substantial investments in energy efficiency. But we anticipate demand to surge relative to recent history as the global appetite for energy becomes an increasingly dominant mega theme (Figure 2). In our view, listed infrastructure stands to benefit greatly from this theme, reflecting the essential role of the asset class at this historic inflection point in the demand for energy.

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:

• macro and asset class views that gain consensus among our investors
• insights from thematic “deep dive” discussions by the GIC and guest experts (markets, risk, geopolitics, demographics, etc.)
• guidance on how to turn our insights into action via regular commentary and communications