U.S. Large-Cap Stocks Remain Attractive Despite AI Valuation Concerns
Real Estate Market Entering Early Stage of Recovery
Infrastructure Investment Opportunities Driven by Surging Energy Demand
Nuveen Asset Management (hereafter "Nuveen") has released its 2026 Global Investment Outlook report through its Global Investment Committee (GIC). The report identifies five key investment themes expected to drive markets in 2026: U.S. equities, alternative credit and private equity (PE), real estate, municipal bonds, and infrastructure, and outlines related investment opportunities.
U.S. Large-Cap Stocks Remain Attractive Despite Valuation Concerns
First, Nuveen's Global Investment Committee emphasized that continued investment in U.S. assets should be accompanied by a cautious and consistent approach. The current market is closely watching whether the surge in U.S. equities, driven by the artificial intelligence (AI) boom, is a bubble. Meanwhile, non-U.S. investors have started to reduce their U.S. exposure, citing tariff policies and the trend of deglobalization.
Nevertheless, Nuveen assessed that there is still upside potential for U.S. large-cap stocks. While there are concerns about the uncertain timeline for AI monetization among some mega-cap technology companies, ongoing capital expenditures (CAPEX) related to AI show no signs of slowing, supporting continued growth expectations.
Saira Malik, Nuveen's Chief Investment Officer (CIO), stated, "A 'barbell strategy' that combines high-growth U.S. tech and AI themes with defensive assets such as dividend growth stocks and listed infrastructure remains valid." She added, "While paying attention to the high valuations of some AI-related stocks, it is still crucial to select quality stocks. U.S. large-cap stocks are expected to continue to stand out, as the technology sector maintains its leadership and the tax and regulatory environment remains favorable."
Alternative Credit and Private Equity as Core Pillars of the Portfolio
Second, Nuveen highlighted that alternative credit and private equity (PE) should be considered core assets in portfolios. Although the global bond market remains attractive, Nuveen pointed out that duration risk and tightening credit spreads could serve as potential headwinds that limit further upside.
Specifically, Nuveen identified promising sectors beyond traditional fixed income, including senior loans, collateralized loan obligations (CLOs), public and private securitized assets, real estate and infrastructure loans, and C-PACE (Commercial Property Assessed Clean Energy). C-PACE is a public-private financing program implemented by U.S. state and local governments that provides building owners or developers with low-cost, long-term capital to support improvements in energy efficiency, water conservation, and climate resilience in commercial real estate.
Furthermore, despite some recent concerns about saturation or potential distress in the private credit market, Nuveen believes there are still robust opportunities in the middle-market direct lending sector targeting small and mid-sized companies.
Anders Persson, Nuveen's Global Fixed Income CIO, commented, "At present, U.S. Treasuries are less attractive as investments, and if the Federal Reserve's pace of rate cuts falls short of market expectations, U.S. Treasuries could face challenges. However, over the next few quarters, duration is expected to resume its traditional role of defending against economic slowdown risks."
Real Estate Market Entering Recovery Phase
Nuveen assessed that the real estate market has just entered the early stages of recovery. After years of declining values, oversupply, and weakened demand, the real estate market shifted in 2025 to a phase of value rebound and reduced supply. Nuveen expects a subsequent recovery in real estate demand.
Nuveen also analyzed that the current real estate market is being led by rising income (rental) yields. While capital appreciation has not yet materialized in earnest, Nuveen expects gradual capital value gains to provide additional upward momentum for the market going forward.
In terms of sector outlook, while the office sector continues to face downward pressure, Nuveen identified medical offices, grocery-anchored retail, and affordable housing as areas offering notable opportunities.
Nuveen also emphasized that real estate debt investments continue to offer attractive valuations and relatively wide spread premiums. Additionally, as the overall market recovery continues, there is increasing potential for a more positive outlook on real estate equity investments.
The report also presented a positive view on U.S. municipal bonds. Throughout 2025, municipal bonds underperformed despite strong fiscal health, excellent credit quality, and low default rates. However, Nuveen noted that in recent months, the trend has reversed, with a rebound underway.
Infrastructure Investment Opportunities Driven by Surging Energy Demand
Finally, Nuveen emphasized that the explosive increase in energy demand, solid fundamentals, defensive characteristics, and inflation hedge benefits are all contributing to the appeal of infrastructure investments. Key opportunity areas include new data center construction, gas-fired power generation, and utilities that can leverage strong long-term structural growth. Nuveen also advised focusing on regions with the highest electricity demand growth while avoiding areas with regulatory risks.
Nuveen analyzed that there are also opportunities in the private infrastructure market, especially in data centers, energy storage systems (ESS), and "sustainable infrastructure" that facilitates green transitions.
Additionally, Nuveen stressed the importance of paying attention to investment opportunities arising from "second derivative" effects-those beyond the direct beneficiaries of the AI boom and energy transition. These include power grid upgrades, solutions to water shortages resulting from increased data center construction, and the potential impact of AI on employment and corporate governance. Nuveen expects that asset-backed securities (ABS), real estate, and municipal bonds associated with infrastructure development will also see both direct and indirect opportunities due to AI.
Nuveen is a global investment manager under the Teachers Insurance and Annuity Association of America (TIAA), managing approximately 1.4 trillion dollars (about 2,063.74 trillion won) in assets.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
