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Section 5: Best ideas across asset classes
Equities
Best ideas
- We suggest a barbell approach balancing growth-oriented U.S. tech/AI exposure with defensive positioning in dividend growers and listed infrastructure, both offering income and potentially lower volatility.
Investment positioning
Solid (if somewhat mixed) economic growth, slowly declining rates and positive earnings momentum continue supporting global equity markets. Valuations have been looking increasingly full, but investors have continued to look past that concern. On balance, we maintain a neutral stance and believe investors should focus on high-quality stocks and selection rather than the macroeconomic backdrop.
The AI boom remains powerful with long-term tailwinds, but increased scrutiny of megacap tech companies should help drive broader market leadership. We think value and cyclical strategies are positioned to benefit most from this trend.
We continue to favor U.S. large cap stocks over small caps and other developed markets, supported by a dovish Fed and growth-friendly tax and regulatory policy. While emerging markets have rallied recently, we remain cautious given trade policy and geopolitical vulnerabilities.
We also remain positive toward equity markets, as discussed as part of our portfolio construction themes.
Fixed income
Best ideas
- Preferred securities should benefit from strong fundamentals and limited new issuance. Senior loans offer attractive yields and value.
- For municipal bonds, we favor select opportunities in health care and higher education and believe the 14-to-17 year duration range offers value.
Investment positioning
We remain constructive on global bond markets. Despite tight credit spreads in some areas, yields are attractive, fundamentals strong and investor demand high. As has been the case for some time, we think it makes sense for investors to exercise broad diversification and take advantage of the nimbleness and flexibility offered by active management.
U.S. Treasuries offer poor relative value. We expect long term rates to remain range-bound even as short-term rates decline. We advocate maintaining neutral duration and focusing on credit opportunities.
Investment grade credit faces potential headwinds from tight credit spreads and extended duration. In contrast, areas such as senior loans and CLOs offer interesting opportunities given relatively high yields and sector dislocations. Emerging markets debt, especially corporates, also appears compelling, while high yield fundamentals remain solid with favorable long-term prospects. We are upgrading preferred securities, which offer a compelling combination of attractive yields, solid credit quality and decent liquidity. We remain constructive toward securitized assets on a long-term basis, but recent performance has been very strong, and spreads now offer fair value.
Municipal bonds rank among our top preferences. Strong fundamentals support improving prices and attractive relative value. The upward-sloping municipal yield curve offers compelling yields for those who are looking to extend duration.
We are carefully monitoring private credit markets for signs of stress but continue to see opportunities. Recent negative headlines and ongoing isolated credit events underscore the importance of careful selectivity focused on deal structure and strong covenants.
Real estate
Best ideas
- Across both private and public real estate, our focus is on sectors with compelling supply/demand characteristics, such as light industrial, convenience oriented retail, senior housing and data centers.
Investment positioning
We are bullish on private real estate’s ongoing recovery. Price returns are strengthening across geographies and property types, driven initially by rising income returns and reduced supply. We anticipate capital appreciation gains as well over the coming quarters.
Among sectors, our favored areas include light industrial, convenience-oriented retail, health care and global housing. Light industrial features low vacancy rates and limited new supply given the difficulties associated with industrial zoning. Convenience oriented retail offers the benefits of high demand and occupancy for grocery-anchored centers, while health care (specifically medical office and senior housing) benefits from an aging population, particularly in the U.S. and Japan. And global housing provides the most critical of basic needs and enjoys long term tailwinds from robust demand.
Real estate debt remains attractive with wide spread premiums, though we increasingly favor equity as the recovery broadens.
Public REITs have rallied, with net asset values now near fair value. We think this is a stock-pickers’ market and our focus is on senior housing, health care, data centers and manufactured housing/RV resorts providing affordable housing options.
Infrastructure and real assets
Best ideas
- In public markets, we are focused on electric utilities that are trading at a discount while delivering accelerating earnings growth. In private markets, we continue to focus on investments that align with climate and digital transformations, such as clean energy generation, energy storage and data centers.
Investment positioning
Infrastructure investments across public and private equity and debt markets continue to be an area of emphasis for Nuveen’s Global Investment Committee. Energy demand shows no signs of slowing, and infrastructure investments feature strong fundamentals, resiliency and inflation-hedging potential. Additionally, rising uncertainty and volatility across financial markets are driving increased demand for real assets more broadly.
Public infrastructure looks particularly compelling with attractive valuations, durable cash flows and the essential service/defensive characteristics of the underlying businesses. Opportunities include data center buildouts, gas-powered generation and utilities positioned to capitalize on secular growth. We are focused on regions experiencing the highest power demand growth while avoiding jurisdictions experiencing regulatory scrutiny.
On the private markets side, infrastructure opportunities span equity and debt, particularly assets benefiting from surging power demand and cloud computing expansion. We favor modern, efficient energy infrastructure over legacy assets, emphasizing data centers and sustainability-focused investments supporting environmental transitions. We also see select opportunities in energy storage, especially in European equity investments.
Farmland remains a compelling long-term allocation for differentiated returns potential and inflation hedging characteristics. However, row crop margins continue moderating, particularly in the U.S.
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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. 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.
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