Saira Malik

1. Don’t bet against the US

One of the main questions on investors’ minds is whether the AI-driven U.S. equity surge has created a bubble. Additionally, tariffs and the corresponding rise of deglobalization have prompted some investors (particularly those outside the U.S.) to reduce U.S. exposure. But we think U.S. large caps still have room to run. U.S. megacap tech companies may have less-than-clear monetization timelines around some aspects of AI profitability, but we think investors will continue to reward AI-related capex spending, which shows no sign of slowing
down in the U.S. (Figure 2).

Outside of the U.S., other global equity markets appear cheaper, but we see no catalyst for a leadership shift. And beyond equities, we think stronger relative economic growth, favorable tax and regulatory policies and a diversified economy offer compelling U.S. opportunities across such areas as private credit, private asset-backed finance and private investment grade bonds.

2. Alternative credit and private equity should be core allocations

While global fixed income remains attractive, we’re wary of duration risk and credit spread
tightening. At the same time, we think many (if not most) investors are underweight private markets and could benefit from taking on liquidity risk to seek enhanced returns, income and diversification. As such, we encourage investors to seek out alternative credit sectors beyond traditional fixed income benchmarks, including senior loans, collateralized loan obligations, public and private securitized assets, real estate and infrastructure debt and Commercial Property Assessed Clean Energy (C-PACE) financing.

Private credit headlines question whether the market is oversaturated or cracking. We see issues with underwriting and deal structure in riskier segments, but strong opportunities remain, particularly in middle-market direct lending. Selectivity and partner choice will prove critical – rising tides will no longer lift all boats. Deal structure and covenant protections will matter more.

Private equity also shows promise. Lower interest rates should spur M&A activity, and tougher fundraising means experienced managers are deploying capital. We favor senior over junior capital and prefer secondary markets with single-manager structures.

3. Municipals may be at the forefront of a new bull market

Throughout 2025, municipal prices lagged despite strong balance sheets, solid credit quality and low defaults. That has started to change over the last couple of months as municipal prices have begun to rally. We believe munis continue to offer value. As supply eases and
demand rises, supportive interest rates and strong fundamentals could continue to power
municipal bonds forward.

With municipal yield curves steeper than Treasuries, investors may be well compensated for duration risk. We see compelling opportunities across both high grade and high yield municipals.

4. The real estate rebound is just getting started

After years of falling values, oversupply and weak demand, 2025 saw values rebound and supply contract. We expect demand should follow.

For now, real estate markets are being driven by rising income returns. Capital appreciation hasn’t materialized yet, but we expect that will rise as well, providing another tailwind. The office sector remains under pressure, but medical office, grocery-anchored retail and affordable housing offer notable opportunities.

5. Look for the “second derivative” trades from the AI book and energy revolution

Megacap tech and data centers led early AI gains. And while we still see opportunities there, we think investors should also look for the secondary and future implications of these trends.

Other infrastructure investments such as utilities, battery storage and energy transmission look compelling, as detailed in our “best ideas” section. AI also creates direct or indirect opportunities in select asset-backed securities, real estate and municipal bonds tied to infrastructure buildouts. Despite U.S. political headwinds, the global shift toward renewables and energy efficiency continues as diverse power sources become essential.

We also think investors should pay attention to broader, longer-term AI and energy trends and risks. Key issues include upgrading the power grid, the intersection of data center growth with water scarcity, and AI’s impact on employment and corporate governance.

By Saira Malik, Head of Equities and Fixed Income & Chief Investment Officer

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Saira Malik

Holiday cheer or new year drear: What will December bring?

For consumers, there are 16 shopping days until Christmas, and for investors, just 12 trading days. In either case, the holiday season is in full swing, and like countless children around the world wishing for something special from jolly old Saint Nick, equity markets are hoping the U.S. Federal Reserve will bring them a comfy-cozy interest rate cut (size 25 basis points, please) at next week’s Fed policy meeting. Market odds currently favour just such a move.

But while equity markets are exuding holiday cheer as they trade at or near all-time highs, public fixed income investors appear more reserved, preparing for a higher-for-longer interest rate environment as the bond yield backup that followed the Fed’s first rate reduction in September remains intact. Unexpected economic resilience in the wake of that cut makes it difficult to divine the direction and pace of monetary policy. Last week’s release of consensus-topping U.S. nonfarm payrolls for November offered the latest evidence of labour strength, as job creation rebounded from a weak October marred by disruptive hurricanes and worker strikes. Meanwhile, wage growth remained steady at +4.0% year-over-year.

On balance, we think investors needn’t be overly concerned that the Grinch or Scrooge will derail the Fed’s sled this December. It’s also worth noting that the current level of the real fed funds rate is not an outlier relative to history (Figure 1). So even if a beloved flying woodland creature with a storied illuminative nose were waylaid, this investment season still offers sound portfolio allocation ideas that can counter the potential chill of a higher-for-longer rate environment.

Portfolio considerations

The U.S. economy is approaching 2025 on solid footing, with GDP growth above expectations and the employment market remaining resilient. We expect the Fed will continue its easing cycle, but at a slower pace than markets previously anticipated. A milder and more protracted decline in interest rates means fixed income investments may not benefit much from capital appreciation in the near term. Against that backdrop, our fixed income positioning for next year is focused on four themes:

1. Current yields are near their highest levels in more than 15 years. Higher base rates have significantly enhanced income potential, with yields of about 6% or more for investment grade plus sectors such as preferred securities and securitized assets, including asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS) (Figure 2).
2. Short- and long-term rates will be higher for longer. That makes exposure to shorter-duration, floating-rate instruments such as senior loans — currently yielding 8.5% — a compelling choice, especially given their sound credit fundamentals. Like senior loans, ABS are also relatively low duration, in addition to providing attractive yields. Also worthy of consideration are esoteric securities backed by nontraditional assets, offering a spread between 75 and 125 basis points in yield compared to short-maturity corporate bonds.
3. Balance duration risk with credit risk. Within investment grade categories, we are less positive on corporates, where duration is much longer than in other fixed income sectors. In contrast, preferred securities — in particular, the $25 par segment — offer nearly 1.5% of yield per year of duration. Preferreds also look well-positioned for 2025, as potential deregulation and an expected pickup in M&A (mergers and acquisitions) activity could bode well for banks, the largest issuer of preferreds.
4. Position for volatility. In the below-investment grade space, we favour an up-in-quality approach. Within senior loans, we find exposure to BB and B rated issues particularly attractive. BB rated loans, for example, have a healthy interest coverage ratio of 4.X, according to Bloomberg.

By Saira Malik, Head of Equities and Fixed Income, Chief Investment Officer

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Saira Malik

Saira Malik has been named head of the Nuveen Equities and Fixed Income platform. Ms. Malik takes on this business leadership position from William Huffman who served in the role prior to his appointment as CEO in June 2024.

Saira will also continue to serve as Nuveen’s Chief Investment Officer and Chair of Nuveen’s Global Investment Committee, driving market and investment insights and delivering client asset allocation views from across the firm’s independent investment teams.

Commenting on the appointment, William Huffman, Nuveen CEO said “As a proven leader who has dedicated two decades of her career to the evolution and growth of Nuveen’s platform, Saira is ideally suited to take on leadership of the Equities and Fixed Income business. In this expanded role, Saira will work closely with the talented leaders and teams who oversee more than $1T in AUM across equities, global fixed income, munis, private placements, multi-asset strategies and C-PACE lending.”

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