Nuveen: Global investment Committee 2020 Outlook
Diversify and defend
Nuveen’s investment theme for the coming year is 20/20 vision: a clearer path for growth. The “clearer path” part is pretty straightforward: Our investment leaders think the macro fears that dominated most of 2019 have receded. Monetary policy is easier than it was a year ago, and global recession risks seem to have faded too. Trade policy remains a source of concern, but hasn’t been causing the sorts of market selloffs it did in late 2018 and earlier in 2019. And while other geopolitical events such as Brexit and the 2020 U.S. elections will likely spark fresh bouts of volatility, we think what has been the longest postwar economic expansion in history still has legs.
But it’s that “20/20 vision” part of our theme that I think may be more important. Because 2020 looks to be a year where investors will need keen vision to closely scrutinize markets to find the fewer investment opportunities that exist the longer the bull runs. That’s what we discussed at our year-end meeting of Nuveen’s Global Investment Committee , where we also debated what’s been happening in the markets, where we might be headed and, of course, what it all means for our clients’ portfolios.
As you’ll see in this outlook, while we continue to find good investment opportunities across asset classes, we are also increasingly concerned about fuller valuations, whether the asset in question is a stock or a real estate property. And although we’re calling for continued global growth, we recognize that the world is in the later stages of the current economic and credit cycle. So, putting our 2020 theme in context, picture a year in which the economy’s path seems clearer but markets … not so much. That’s a notable shift from what investors have come to expect over the past decade when we enjoyed strong financial returns while worrying about economic growth. The bottom line: Be prepared to tamp down your return expectations.
We think it makes sense for most investors to have a broadly defensive stance even as they stay invested, focusing on quality growth in equities and higher quality in fixed income, for example. We would balance that defensive stance by looking at select emerging markets equities and debt as well as a range of alternatives to help generate portfolio returns that may be tougher to find in traditional asset classes.
Regardless of how defensive you choose to be in your portfolio, diversification and selectivity will become ever more important, especially as we think yields will remain low, returns will be tough to come by and volatility may rise. In fact, as you’ll see reflected in our portfolio construction discussion, diversification itself is our highest-conviction trade. That means getting more exposure to more risks and more opportunities across asset classes, while also remaining nimble. And if that sounds like an argument for active management, it is.
We hope the insights offered here, along with Nuveen’s broad, diverse and deep investment platform and portfolio-construction expertise, can help you reach your unique investment goals in 2020.