Our best investment ideas
Asset class outlooks
Saira Malik, CIO, Head of Global Equities
- U.S. small caps should benefit from higher inflation, solid economic growth and rising interest rates.
- We also favor non-U.S. developed markets, which are relatively undervalued and should experience solid earnings growth.
Broadly speaking, valuations across public equities around the world appear full, but we see opportunities across sectors and markets. We expect valuations to be relatively flat next year. And at the same time, earnings growth is likely to decelerate (but remain above trend). As such, we expect equities will rise next year, but volatility should increase and opportunities will be harder to source. This will make stock selection increasingly important. A key risk would be if the Fed tightens policy too quickly as a result of unforeseen wage increases.
We see opportunities across both value and growth styles, but with a mostly cyclical bias. Regarding geographic positioning, U.S. returns have dominated developed markets due to a faster reopening and stronger economic growth. We expect other developed markets (especially Europe) to catch up in 2022. Emerging markets look undervalued, but the regulatory overhang from China remains a dark cloud.
Private equity demand remains exceptionally high and fundamentals still look sound, but some valuations are becoming inflated.
Anders Persson, Chief Investment Officer, Head of Nuveen Global Fixed Income
- Floating-rate loans look attractive given our preference for taking on credit risk over duration risk.
- Technicals in this market are also strong with strong ongoing demand.
- We also think a focus on preferred securities makes sense, as issuers have strong fundamentals and supply should be limited.
A combination of healthy economic growth and moderate inflation should lead to modest continued upward pressure on interest rates in 2022. The U.S. Fed has already started tapering, and we could see interest rate increases before the end of next year. Central banks around the world are also becoming more biased toward tightening.
We favor spread sectors over government bonds. Credit markets look fully valued, but we think current prices reflect strong fundamentals rather than excess optimism. We expect default rates to be very low next year, and think it makes sense to generate extra yield by moving down in quality. We also favor a shorter duration stance across taxable fixed income markets.
The key risk next year would be higher-than-expected inflation that results in a policy mistake of too much tightening.
John Miller, Head of Municipals
- With Puerto Rico likely experiencing a full exit from bankruptcy next year, we’re seeing value in select bonds from the territory — especially in the electric power space.
- Additionally, we think select health care-related bonds have been held back by regulatory concerns and appear undervalued.
Solid economic growth, rising tax revenues, low default rates and strong technicals provided tailwinds for municipal bonds in 2021, and we expect these trends will persist into next year. Federal stimulus and new infrastructure spending should also provide multiyear benefits for state and local governments through increased municipal project funding.
We expect demand to remain high: Market inflows remain solid and non-U.S. buyers of municipal bonds show no signs of slacking. Prospects for higher U.S. tax rates could push even more investors into munis.
Given this optimistic backdrop, we see value in lower credit areas (especially in certain high yield municipals) and think it makes sense to take advantage of times when the yield curve offers the opportunity to extend duration. We also continue to emphasize ESG themes, with a focus on issuers who are providing more transparency about how municipalities are addressing climate change risks.
Carly Tripp, Global Chief Investment Officer and Head of Nuveen Real Estate Investments
- In addition to these region-specific ideas, we have a global theme of leveraging digitization and technological advancements when selecting and managing real estate.
- Additionally, we’re seeing emerging opportunities in retail spaces as that sector recovers from the pandemic.
Continuing global economic reopening and strong capital flows should provide ongoing tailwinds for private real estate investments.
In the U.S., we’re focused on alternative sectors (single-family rentals, self storage and manufactured housing), as well as growth opportunities across the Sunbelt. In Europe, we see value in storage, convenience retail and suburban housing. And in Asia/Pacific, we prefer industrial distribution centers, as well as multifamily and senior living properties.
We’re also continuing to work with the properties we own to drive renewable energy and sustainability to help enhance value.
Justin Ourso, Head of Nuveen Real Assets
Jay Rosenberg, Head of Public Real Assets and Portfolio Manager
- In public markets, we point to road and rail transport enjoying the tailwinds of recovering traffic levels and competitive pricing, as well as waste companies that should benefit from rising prices and increased demand.
- Across private real assets, we favor investments that align with climate transition themes such as carbon sequestration in natural resources, clean energy and storage, renewable fuel sources and greenfield sustainable infrastructure.
We have a relatively neutral view toward publicly traded real estate given price appreciation over the past year and valuations that generally are no longer discounted versus private real estate. Fundamentals remain solid, however, and continue to improve in COVID-impacted sectors. Within this asset class, we prefer companies less impacted by rising rates with shorter lease durations and those with improving cash flow prospects.
We are broadly favorable across many areas of public infrastructure, and would emphasize companies with assets that can offer an inflation hedge such as transportation investments that could benefit from improving trade and increasing passenger travel, utilities focused on renewable energy and waste-related companies that should be helped by continued economic reopening.
Private real assets should continue to benefit from high investor demand and relative insulation from economic cycles. We expect many areas able to pass through price increases should benefit from inflation.
In this space, we’re focused on a number of different investment themes, including rising demand for timber and carbon sequestration, continued strong appetite for clean energy, opportunities across infrastructure, agribusiness and farmland and assets that are better able to cope with supply chain disruptions.
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. Past performance is no guarantee of 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.
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.
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