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Weekly Commentary

Catalysts to quell volatility — what, how and when?

Saira Malik
Chief Investment Officer
Saira Malik, Chief Investment Officer

Bottom line up top

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:

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