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Investment outlook

Portfolio construction themes

Global Investment Committee
Bringing together the most senior investors from across our platform of core and specialist capabilities, including all public and private markets
Two people walking in the snow up a mountain

The economic backdrop that investors have been anticipating appears to be on the horizon — easing inflation and less aggressive central banks (although the U.S. Federal Reserve is likely to continue tightening, albeit at a more measured pace), but also an increasing likelihood of recession. Our 2023 portfolio construction themes center on seeking resilience through investments that can power through a cyclical downturn and provide the ballast that has eluded investors in 2022. And, at the same time, account for the damage in public markets and the consequential imbalance in private markets.

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”

Portfolio themes

Figure 1: Public infrastructure has more than weathered previous growth slowdowns

Significant changes in our views:

Growth risks have moved to the forefront. As painful as 2022 was, our Global Investment Committee remains cautious about taking on additional risk in portfolios heading into 2023 until we see more evidence of the negative economic impact of higher rates, including rising unemployment and lower nominal retail sales.

This sentiment is exhibited in our updated heat map, which shows our preference for rates-duration assets such as U.S. Treasuries and investment grade credit at the expense of senior loans and high yield. We also notably upgraded listed REITs, which are pricing in more of the bad economic news than their private counterparts.

We think it makes sense to modestly extend duration and focus on higher quality areas of the bond market.

Our highest-conviction views:

Higher quality corporate debt (+) offers compelling yields and spread levels as bright spots that should not be ignored. And their income provides a cushion against any negative price action resulting from spread widening. Investment grade credit offers a good option as recession risk concerns increase.

Infrastructure (+) appears well insulated from higher debt costs and elevated inflation. We favor U.S.-based utilities, midstream pipelines and waste management companies. For utilities, U.S. oriented operations and a supportive regulatory environment provide some insulation from geopolitical risks and allow inflation costs to be passed through to consumers. Additionally, the Inflation Reduction Act makes capital spending on green energy initiatives far more attractive. Midstream pipelines stand to benefit from the growing challenges of global energy scarcity as the world becomes more reliant on U.S. energy sources. Waste management companies should provide above-market growth thanks to unwavering demand for their operations, which translates to pricing power. Furthermore, infrastructure performance has historically been decoupled from economic growth (Figure 1).

Non-U.S. equities and debt (-) remain significant underweights. We believe risks remain concerning the strong U.S. dollar, uncertainty surrounding China, the ongoing Russia/Ukraine war and potential stagflation in the U.K. and Europe. In particular, we are most negative toward U.K. and European markets (where these risks are most concentrated) and slightly less negative toward emerging markets, which could improve if risks in China recede.

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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 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. 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. Socially Responsible Investments are subject to Social Criteria Risk, namely the risk that because social criteria exclude securities of certain issuers for non-financial reasons, investors may forgo some market opportunities available to those that don’t use these criteria. 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 provides investment advisory services through its investment specialists.
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