Amid shifting US trade policy, a slowing global economy and persistent volatility, Nuveen’s Global Investment Committee remains constructive on selective asset classes, particularly US large caps, infrastructure, municipal bonds and real estate. In its mid-year 2025 outlook, the committee outlines five key themes that seek to cut through the “noise” and identify where long-term opportunities lie.
Despite fears around inflation, rising tariffs and geopolitical instability, Nuveen believes that the right allocations across public and private markets, with a strong emphasis on credit quality and thematic alignment, can help investors withstand a choppy second half of 2025.
1. Relative spreads and credit quality take precedence over rate movements
With US Federal Reserve rate cuts now expected later in the year, most likely September and December, and long-term yields remaining volatile, the outlook for fixed income has shifted. Rather than focusing on benchmark interest rates, Nuveen says investor attention should be on credit spreads and sector-specific fundamentals.
The committee is slightly less negative on government bonds than in previous quarters, but notes stronger opportunities lie in credit sectors such as securitised assets, senior loans, preferred securities and municipal bonds. Private credit, with an emphasis on defensive, higher-quality exposures, is also favoured.
2. Municipal bonds present strong long-term value
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Municipal bonds, which have underperformed broader fixed income so far this year, are seen as offering attractive yield opportunities, particularly in water and sewer infrastructure, healthcare and higher education.
Despite higher new issuance and shifting tax policy debates, current yields on municipal bonds are in the 97th percentile of their 10-year history. Nuveen expects that as interest rate volatility eases, munis will reassert their role in diversified portfolios, especially for investors extending duration.
3. Real estate recovery under way, supported by sector selectivity
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After two years of decline, private real estate has begun to stabilise. While the office sector remains under pressure, Nuveen notes upside in medical office, grocery-anchored retail, senior housing and industrial real estate.
Lower construction starts and solid long-term demand drivers support valuations. The committee expresses a mild preference for real estate debt over equity due to attractive spreads, but notes the gap is narrowing.
4. Global economies remain correlated despite trade decoupling narratives
While “decoupling” dominates political rhetoric, global economic and monetary policy trends are still largely aligned. As such, Nuveen warns against a “sell the US” bias, maintaining an overweight on US large caps driven by resilient earnings growth.
Expected earnings for US companies are now pegged at 10% year-on-year, outperforming peers in Europe and China. Nuveen remains positive on megacap tech, banks, and defensive sectors such as utilities and infrastructure. European equities are seen as offering long-term value, while emerging markets are viewed with caution amid ongoing trade risk.
5. Energy demand driven by AI creates infrastructure upside
The growth in power demand to support AI data centres, cloud computing and electrification continues to exceed supply. Nuveen highlights opportunities across both public and private infrastructure, including electric utilities, transmission assets, power producers and energy storage.
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The committee is particularly positive on AI-related infrastructure and North American senior housing, where demographic trends and supply constraints are converging.
Portfolio implications
Nuveen’s best ideas reflect a combination of yield opportunities and sector resilience. In equities, dividend growers and listed infrastructure top the list. For fixed income, the focus is on securitised credit, preferred securities and municipals. In real assets, demand-led sectors such as senior housing and clean energy-linked infrastructure remain preferred.
Despite higher headline risks and geopolitical disruptions, Nuveen maintains that investors should avoid overreacting to noise. A diversified approach, underpinned by thematic alignment and quality selection, is still the most effective strategy for navigating the remainder of the year.
