Nuveen sees obstacles to growth through year-end fall away, revealing pockets of opportunity

NEW YORK, June 29, 2020 /PRNewswire/ -- Nuveen, a leading global investment manager, believes the United States is emerging from the deepest and possibly shortest recession in modern history and expects U.S. economic activity to return to its Q4 2019 in the second half of 2021 but sees unemployment remaining between 8% and 10% through much of 2021. The money manager notes that while global fiscal policy has been effective so far at replacing lost income and helping businesses stay afloat, lower yields mean investors must take on more risk to generate income. These insights and expectations are detailed in its annual Mid-Year Outlook for clients.

Fixed Income Forecast

"The overriding story in fixed income markets has been central banks keeping interest rates pegged at very low levels and the implications for other fixed income sectors. While credit markets have come back considerably from their distressed levels in March, we do not expect a significant further rally, and prefer to use diversification and selectivity when building portfolios," remarked Bill Martin, CIO of Global Fixed Income. 

• Take a neutral position when it comes to duration. Investors will be better served finding income opportunities by selectively taking on credit risk.
• We have a more cautious view toward more levered issuers and sectors more directly affected by the pandemic, such as high yield and leveraged loans as broad asset classes.
• We are focused on quick-moving idiosyncratic opportunities, including select high yield investments and emerging markets that have larger and more diversified local investment bases.
• Favorable sectors include U.S. financial sector and preferred and asset-backed securities.
• As markets continue to recover, we expect better conditions for and see value in high yield municipals, especially those that could benefit from a more risk-on stance that favors leverage and credit exposure.
• Land-secured bonds remain an area of focus, as well as higher-quality municipalities and projects focused on clean water, recycling and food resourcing.

Equities Expectations

"The battle between growth stocks and cyclicals will continue through the remainder of 2020 as re-openings accelerate along with risks of a second wave of coronavirus," said Saira Malik, CIO of global equities at Nuveen. "In the meantime, a focus on quality across geographies and industries is the best shield against volatility for investors."

• Growth will continue to benefit over the long term given a persistent environment of relatively slow economic growth.
• Focus on select high-quality value investments that would benefit from improving economic conditions and growth companies that could achieve long-term advantages from an increasing shift to digital and online consumption.
• ESG-focused companies, which tend to be of higher quality, will continue to outperform.

Portfolio Construction Recommendations

"The global economy is healing, but the trajectory of the recovery is far from clear, making the implications for financial markets murky at best. Even so, with economic policy as supportive of growth as it's ever been, those who stay invested will continue to be rewarded," Brian Nick, chief investment strategist commented. "Investors who need to generate current income from their portfolios, however, will continue to face a challenge in finding a mix of assets that provide yield without incurring too much risk in the process."

• Stay invested, keep rebalancing.
• Cast a wider net for income.
• Be deliberate about risk-taking.
• Focus on high quality and relative value.
• Harness the advantages of active management.

For a more detailed view of Nuveen's expectations across asset classes, including real estate and real assets, please visit Nuveen's Mid-Year Outlook: 20/20 Vision, A Clearer Path for Growth.

About Nuveen

Nuveen, the investment manager of TIAA, offers a comprehensive range of outcome-focused investment solutions designed to secure the long-term financial goals of institutional and individual investors. Nuveen has $1 trillion in assets under management as of 31 March 2020 and operations in 27 countries. Its investment specialists offer deep expertise across a comprehensive range of traditional and alternative investments through a wide array of vehicles and customized strategies. For more information, please visit www.nuveen.com. 

Contact:
Mary Ellen Higgins
Nuveen Media Relations
781.789.1911
[email protected]

E-Soo Kim
Nuveen Media Relations
212.207.2012
[email protected]  

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SOURCE Nuveen

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