NuShares from Nuveen 2017 Outlook

NuShares from Nuveen

In 2017, Responsible Investing & Income Should Lead the WayIn 2017, Responsible Investing & Income Should Lead the Way

These days when the team at Nuveen Investments is talking with advisors, two key themes are on the top of their minds: a focus on income generation and the alignment of client values with their investments.

“Reviewing the markets from 2016 assists Nuveen in preparing advisors to best serve their clients in 2017,” says Jordan Farris, Nuveen’s head of product development for ETFs.

Briton Ryan, Nuveen’s head of ETF Capital Markets, agrees, “The environment has shifted, and the advisor’s strategy must adapt to that change in order to best support the needs of their clients.”

Nuveen offers a growing suite of ETF products designed to outperform current fixed-income benchmarks by tracking indices that utilize an enhanced yield optimization when selecting and weighting their constituents. In addition, Nuveen has launched a suite of socially responsible options that seek to pair competitive returns with investor’s values.

As always, the past provides insight into the future, which is why Farris stresses the importance of looking back at the events of 2016. The stock market began 2016 on a sour note with the market down 10% by mid-Q1.

However, just as investors were preparing for the worst, corporate earnings began to pick up and domestic equities experienced a very strong post-election market rally.

From Nuveen’s perspective, July 8, 2016, was a notable turning point when the 10-year Treasury note bottomed out at 1.37% and then increased by 100 basis points by year-end. It is possible that this event marked the end of the 35-year bull market in bonds.

This means advisors may need to make adjustments to their portfolio allocations, and those decisions are likely to have a huge impact on client outcomes over the long term.

“Many advisors are looking at the end of the bull market in fixed income and asking, ‘Should I get out? And if so, how should I allocate moving forward?’” says Ryan. “But fixed income is too important to your portfolio, so the answer is not to run for the exit, but to be more judicious in your allocations.”

That “judicious” path can be found by looking at the many factors at play moving forward. Hourly wages are rising, which will most certainly drive inflation. Interest rates are already climbing. And while the incoming administration is publicizing growth-focused policy changes such as decreased regulations and lower corporate taxes that should be good for investors, these changes may take time to implement.

For advisors, it’s vital to consider this landscape, as well as what their clients need and want in the years to come. Compared to previous generations, many investors looking to retire are still holding a relatively high level of debt, and they’re in better health than prior generations—both of which dictate the need for more income throughout retirement.

For many clients, the new administration’s promise to roll back government regulations has raised an already keen concern for environmental, social, and governance (ESG) issues. These clients are looking closely at their own values and long-term goals.

“Research tells us that 90% of millennials are looking for investments that have strong performance and incorporate strong social, environmental, and governance themes, and they’re not alone,” says Farris. “73% of non-millennials also want their investments to promote social and environmental outcomes.”

To address the need for income and the desire to express social, environmental, and governance ideals, Nuveen strives to enable investors to express their values through their investments without having to tolerate a negative impact on their portfolio’s performance or compromise on their investment objectives.

Looking ahead to 2017, Nuveen views value as more attractive than growth, and small cap equities in a favorable position as compared to large cap equities. To  support the swell of interest in ESG and socially responsible investing, the firm recently launched a suite of five exchange-traded funds (ETFs) that track style-box indices that incorporate ESG criteria.

“We chose to launch all five ETFs as a suite to give advisors options to address the specific needs and goals of each client,” says Ryan. “Nothing should be one-size-fits-all, and our diversified portfolio of ESG ETFs give advisors an opportunity to choose investments that are aligned with each client’s investment strategy and structured to deliver competitive returns.”

Farris stresses patience in selecting investment products. “There is greater uncertainty and complexity in the market. Short-term returns may be unpredictable over the next 12 months. Regardless of an advisor’s viewpoint on the market, we are seeking to bring investment products to market that will accurately meet the needs of each individual client in a way that helps them achieve their goals over the long term.”

Nuveen provides investment solutions designed to help secure the long-term goals of individual investors and the advisors who serve them. Through the investment expertise of leading asset managers across traditional and alternative asset classes, Nuveen is committed to delivering consultative guidance that aligns with client needs. Funds are distributed by Nuveen Securities, LLC, a subsidiary of Nuveen Investments, Inc. Nuveen is an operating division of TIAA Global Asset Management.

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