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Tariffs or taxes on imports, they tend to lower the efficiency of producer's supply chains, and they can leak through into higher prices on consumer goods. As yet however, the total amount of tariffs erected by the United States and the retaliatory tariffs from other countries have not amounted in a dollar sense to a significant impact on the US economy. That could change however, as the tariff rates move up or as the basket of goods effected by the tariffs continues to broaden. We think we might start to see some of the effects of this as early as the fourth quarter, but the most pronounced effects should happen in 2019 and beyond. Ultimately, we don't expect to get a recession because of tariffs or trade protectionism, but as the level of trade protectionism increases, we do expect to see somewhat slower rates of growth and a continued impact on financial markets. One of the things that certainly got our attention in the third quarter was the prevalence of emerging market hotspots that did end up leaking through into the wider markets sentiment towards emerging markets and towards risk assets in general whether we're talking about Turkey or Argentina, there are regional crises happening in several places in the world that are starting to affect investor demand, investors sentiment towards international assets like stocks and bonds. However, we'll be keeping an eye on this in the fourth quarter, continuing to monitor hotspots within emerging markets and ensuring they don't bleed a wider economic contagion. We've seen much stronger levels of private investment this year compared to prior years, and that helps growth in two ways. First, as the investments happening, GDP growth is higher along the way and second, as businesses invest in new equipment, new headquarters, new software for their employees, the hope is that worker productivity down the line will increase and enable us to grow longer and stronger than we would have otherwise. Widespread evidence of rising worker productivity is still hard to come by and we know the cycle is not going to last forever, but we may be seeing an unexpected and welcome increase in capital spending boosting growth as the cycle comes to a close. U.S. equity markets look relatively expensive compared to the rest of the world and the U.S. dollar is near a multi decade high, so there's an argument to be made for U.S. investors increasingly diversifying into international markets. However, we still think the U.S. market has a lot of things going for it, stronger earnings growth, and arguably the strongest developed economy in the world backing it. As long as the effect of last year's fiscal stimulus continues to course through the economy, it's hard to argue that the U.S. isn't going to be among the best performers globally within equity markets. Because trade risks are still likely to dominate financial market headlines and investor psychology, We still think looking for companies who have more domestic exposure from their cash flows will be advantageous for investors at the moment. We are also looking at opportunistic investing within emerging markets given the sell-off we've seen in the first part of this year. Within those countries we favor India because of its closed economy relative to other emerging markets and its very strong level of domestic growth. And within fixed income, we continue to think the higher income sectors tend to trade with a bit more credit risk are going to be preferable for investors as interest rates in the U.S. continue to rise.
2018 Q4 OUTLOOK, (Still) no signs of slowing
Jose Minaya, Chief Investment Officer, Nuveen

At midyear, Nuveen, the investment manager of TIAA, offered the view that global investors by and large should remain in a risk-on mode, even as we pointed out that some cracks were starting to appear in that bullish view. Moving into the fourth quarter, we still believe investors will do best by sticking with pro-growth, risk-on positions, but we acknowledge that changes over the past few months have affected our outlook from here.

In our fourth-quarter investment outlook, (Still) no signs of slowing , we point out that the risks that seemed most pressing three months ago (the U.S. moving into a late-cycle expansion and worries about rising interest rates and inflation) have since given way to concerns about U.S. and global growth divergence and even greater uncertainty about trade. Investors are witnessing a growing dispersion between U.S. stocks and equities in other markets: It seems evident to us that either the U.S. market must correct, or the rest of the world needs to catch up. For now, we are leaning more toward the view that the U.S. still offers further upside potential, but we are increasingly focused on valuation pressures.

As always, we encourage investors to maintain the long view and an appropriately diversified portfolio. Work with your advisor to make sure your asset mix is in line with your overall investment objectives, preferences, and tolerance for risk.

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This material is prepared by and represents the views of Brian Nick, and does not necessarily represent the views of Nuveen LLC, its affiliates or other Nuveen staff.
These views are presented for informational purposes only and may change in response to changing economic and market conditions. This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy or sell securities, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor's objectives and circumstances and in consultation with his or her advisors. Certain products and services may not be available to all entities or persons. Past performance is not indicative of future results. Economic and market forecasts are subject to uncertainty and may change based on varying market conditions, political and economic developments.
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