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Investment outlook

2023: Positioning for the unknown

TIAA General Account digital bundle

Views from the TIAA General Account

At this time of year, I’m often asked to predict the year ahead or at least share my expectations for it. My answer is often unsatisfying to those expecting some sort of prognostication. That’s because the one thing I’m 100% sure of is that I can’t predict the future. But knowing what I don’t know allows me and my team to position the General Account for the unknown and make it resilient.

That means understanding our risk appetite and limits, staying within that risk appetite and diversifying our risks. This strategy is designed to allow our portfolio to meet its goals in any number of different economic scenarios. That way my team and I do not have to predict the future. And the portfolio’s performance isn’t dependent on any guesswork.

With that as a philosophical backdrop, let’s discuss some of the themes investors should be thinking about over the coming year.

The Fed in focus

My base case economic scenario is probably a consensus view: The U.S. economy will slow, but any recession will be relatively mild.

We could see higher inflation in 2023 than we had in 2022. And it it could be a while before we see average inflation levels drop to the pre-pandemic levels of around 2%. Long-term inflationary pressures, such as the transition to renewable energy and de-globalization, will likely keep rates higher for longer – with demographic trends being the only large opposing force.

The U.S. Federal Reserve has been aggressively tightening monetary policy and is just now signaling they may be ready to slow the pace of hikes. My main concern is that the Fed will have to change course before they accomplish what they want to achieve.

For example, should we experience a structural liquidity event– like the global financial crisis or what happened in March 2022 – the Fed may need to step in to provide liquidity. This would run counter to the tightening it’s trying to achieve, and this can create challenging conditions similar to what happened recently in the UK.

Investing themes for 2023

Higher quality fixed income looks attractive: As rates have risen, many investors are in the process of allocating fixed income portfolios toward higher quality areas of the market. Previously, investors were stretched to find income and prepared to invest in lower quality to pick up extra yield. As rates have risen, pursuing higher quality credit is no longer a significant trade-off with income. These positions could also help portfolios be more resilient if there is an economic slowdown.

Private assets continue to look compelling: Generally, private assets can provide additional yield and lower volatility as they’re not marked to market, which is ideal for insurance investors like us. In particular, we think investments supporting the renewable energy transition are interesting over the near to medium term.

We’re looking for more diversification in real estate: The fallout from higher rates and the resulting repricing makes it a good time to consider diversifying from traditional office and retail, and in some cases even industrial real estate into alternative areas like life sciences and affordable housing.

Our main theme – remaining diversified: This is one of the most important aspects in creating a resilient portfolio. As a long-term investor, our goal is to invest in a way that creates optimal outcomes over the long-term, not for just the next twelve months. Resilient long-term portfolios will often seem suboptimal in the short-term, but are well positioned to meet long-term objectives. If we apply our strategy correctly, even as portions of our portfolio may suffer temporarily during downturns, it will allow us to be opportunistic and take advantage of better pricing. And at the end of the day, that’s the entire point of long-term planning, to prepare for the unexpected.

Our goal is to invest in a way that creates optimal outcomes over the long-term, not for just the next twelve months.


As part of his participation in Nuveen’s Global Investment Committee, Nick Liolis offers his perspective as an institutional investor and asset allocator. Neither Nick nor any other member of the TIAA General Account team are involved in portfolio management decisions for any third-party Nuveen strategies.

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Effective 15 January, 2023 Emilia Wiener succeeded Nick Liolis as Chief Investment Officer of the TIAA General Account. The content herein continues to reflect the views of TIAA, Nuveen and the TIAA General Account.
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