Best ideas across asset classes

Section 5: Best ideas across asset classes

• Equities
• Fixed income
• Real estate
• Infrastructure and real assets

Equities

Saira Malik

Best ideas

• We suggest a barbell approach balancing growth-oriented U.S. tech/AI with more defensive positioning in dividend growers and listed infrastructure, both of which offer income and potentially lower volatility.

Investment positioning

Decent economic growth, slowly declining interest rates and positive earnings momentum remain tailwinds for global equity markets. However, valuations in some areas – particularly those tied to AI – give us pause, leading to a broadly neutral view toward equities overall.

We believe investors should focus on high-quality stocks and selection rather than basing decisions on the macroeconomic backdrop. Despite recent tech-related market jitters, AI/tech dominance will likely persist. But we also think it makes sense to balance that with allocations offering potential resilience to downturns, inflation protection and/or stable growth such as infrastructure and dividend-growing companies.

Ongoing U.S. dominance in tech, combined with favorable tax and regulatory policies (which should help financials in particular), supports our preference for U.S. large caps over small caps and other developed markets. Emerging markets have performed well recently, but we remain cautious given potential vulnerability to evolving trade policy risks.

As we discussed in our portfolio construction themes, we are also growing more positive toward private equity markets.

Fixed income

Anders Persson

Best ideas

• Securitized assets (especially commercial mortgage-backed securities) offer strong fundamentals and attractive valuations. Likewise, senior loans provide a compelling combination of attractive yields and value.
• For municipal bonds, we favor select opportunities in health care and higher education and believe the 7-to-11 year duration range offers value.

Investment positioning

We maintain a broadly positive outlook toward global bond markets. While credit spreads have tightened in some areas, current yields remain attractive, credit fundamentals are strong and investor demand for fixed income assets remains elevated. We encourage investors to capitalize on volatility from policy shifts and economic deceleration through broad diversification and active management.

U.S. Treasuries offer poor value at this point. We expect longterm rates to remain range-bound even as short-term rates decline. If the Fed cuts less aggressively than markets expect, Treasuries could face trouble. We advocate maintaining neutral duration while identifying attractive credit opportunities. However, we expect duration to reassume its role as a growth hedge in coming quarters.

Investment grade credit faces potential headwinds from extremely tight credit spreads and extended duration profiles. In contrast, several alternative credit segments, including senior loans, CLOs and securitized assets remain attractive given relatively high yields. Emerging markets debt has performed strongly, with continued tailwinds, especially for corporate markets. High yield and preferred securities feature solid fundamentals with favorable long-term prospects.

Municipal bonds remain among our most preferred segments, and prices have been improving, reflecting strong fundamentals. We think municipal markets continue to offer strong relative value. The upward sloping nature of the municipal yield curve remains attractive and offers compelling yields for those looking to extend duration.

We are closely monitoring private credit markets for signs of stress but continue to see opportunities. Recent negative headlines and isolated credit events reinforce the importance of selectivity, strong deal structures and robust covenants.

Real estate

Donald Hall

Best ideas

• Across both private and public real estate, we focus on sectors with compelling supply/demand characteristics, such as senior housing, medical office and data centers.

Investment positioning

Private real estate markets appear to be in the early stages of recovery with an increasingly favorable risk/ reward profile. Prices have strengthened across property types and geographies over recent quarters, supported by solid fundamentals and accelerating demand. Rising income has driven better performance, and we anticipate improvements in capital appreciation over the coming quarters.

Among sectors, we favor medical office and senior housing, both benefiting from low vacancy rates, robust demand and favorable demographic tailwinds. Neighborhood retail presents compelling opportunities given limited new supply pipelines and strengthening consumer demand.

Real estate debt continues offering attractive valuations and relatively wide spread premiums, although we are growing more favorable toward equity investments as the broader recovery continues.

Public real estate also looks compelling thanks to improving fundamentals, rising demand and constrained supply. Senior housing particularly benefits from an aging population while new construction declines. We are also constructive on data centers, grocery-anchored retail and industrial real estate.

Infrastructure and real assets

Jessica Bailey

Best ideas

• In public markets, we favor electric utilities trading at a discount while delivering accelerating earnings growth. In private markets, we focus on investments aligned with climate and digital transformations – such as clean energy generation, energy storage and data centers.

Investment positioning

Infrastructure investments – both public and private, as well as equity and debt – remain a focus for Nuveen’s Global Investment Committee. Surging energy demand, strong fundamentals, resiliency and inflation-hedging potential combine to create a compelling case for infrastructure.

We are particularly bullish on public infrastructure due to relative valuation and essential service/defensive characteristics. The best opportunities are in new data center buildouts, gas-powered generation and utilities positioned to capitalize on strong secular growth trends. We focus on regions with the highest power demand growth while avoiding those facing regulatory scrutiny.

In private markets, we continue identifying diverse infrastructure opportunities across equity and debt, chiefly those benefitting from surging power demand and expanding cloud computing needs. We focus on modern, efficient energy infrastructure over legacy generation assets, with special attention to data centers, energy storage and sustainability-focused infrastructure promoting environmental transitions.

Farmland remains a compelling long-term allocation for its differentiated return potential and inflation-hedging characteristics. However, we continue to see price moderation in row crop margins, particularly in the U.S.