Today’s Outlook Through a Historical Lens
November 21, 2022
Read Time 2 MIN
With volatility continuing to whipsaw the market, CEO Jan van Eck joined the Howard Lindzon podcast to discuss what investors should expect in the coming quarters. The conversation centered on three key points, with Jan using a historical lens to explain the current market environment and the likely path forward:
- Studying history is valuable because many of the problems we face today have been experienced before, especially from a policy perspective (8:00)
- The connection between the current market environment and the 1970s, and the reasons why Jan thinks bonds will outperform (12:15)
- Investors should brace themselves for an extended period of rising and falling inflation, with a mean level significantly above the Fed’s 2% target (19:25)
What the 1970s Can Teach Us About the Future Path for Bonds
When interest rates are low, an increase in rates usually does a lot of damage to bonds, which is what we’ve seen so far this year. 2022 has been the worst year for bonds since 1976. Looking at the latter half of the 1970s, however, rates increased from 5% to 10%, yet bonds kept making money.
There are two reasons for this. First, an increase in interest rates from 5% to 6% is much less dramatic than a move from 1% to 2%. Second, if you’re getting paid a coupon of 6–7% and you reinvest it, that has a tremendous compounding effect. Based on this, we think bonds are an attractive place to be.
Don’t Expect Current Market Conditions to Change Anytime Soon
There are three things investors are currently facing:
- Monetary policy is tight.
- Fiscal policy is tightening and unlikely to be stimulative.
- We’re in a major global slowdown, if not a global recession.
These conditions are going to be sticking around for a while, and what the markets are looking at now is the pressure on corporate profitability. Stocks are down because the P/E ratios are down, but earnings are still flat. We don’t know yet what earnings will be like, so there will be a lot of information for equity investors to gather over the next few quarters.
Monetary and fiscal policy, as well as global growth, are all contractionary. However, we favor fixed income—based on guidance from the 1970s—and commodity equities, which are very attractively priced and poised for growth.
Other highlights include:
- Current labor market dynamics (23:10)
- The outlook for crypto and digital assets (29:00)
- Bitcoin vs. gold (33:00)
You can listen to the full podcast here: Panic with Friends - Howard Lindzon: Jan van Eck of VanEck Funds on Global Markets, Deglobalization, and Rising Interest Rates on Apple Podcasts.
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IMPORTANT DISCLOSURES
Token Definitions
Bitcoin (BTC) is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.
Please note that VanEck may offer investments products that invest in the asset class(es) or industries discussed in this podcast.
The views and opinions expressed are those of the speaker(s) and are current as of the podcast’s posting date, and are not necessarily those of VanEck or its employees. Video commentaries are general in nature and should not be construed as investment advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. Any discussion of specific securities mentioned in the video is neither an offer to sell nor a recommendation to buy these securities.
Investing in cryptocurrencies comes with a number of risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. There is no assurance that a person who accepts a cryptocurrency as payment today will continue to do so in the future.
There are inherent risks with fixed income investing. These risks may include interest rate, call, credit, market, inflation, government policy, liquidity, or junk bond. When interest rates rise, bond prices fall. This risk is heightened with investments in longer duration fixed-income securities and during periods when prevailing interest rates are low or negative.
There are inherent risks with equity investing. These risks include, but are not limited to stock market, manager, or investment style. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices.
Commodities are assets that have tangible properties, such as oil, metals, and agriculture. Commodities and commodity-linked derivatives may be affected by overall market movements and other factors that affect the value of a particular industry or commodity, such as weather, disease, embargoes or political or regulatory developments. The value of a commodity-linked derivative is generally based on price movements of a commodity, a commodity futures contract, a commodity index or other economic variables based on the commodity markets. Derivatives use leverage, which may exaggerate a loss. Investments in commodities can be very volatile and direct investment in these markets can be very risky, especially for inexperienced investors.
The Gold strategy is subject to the risks associated with concentrating its assets in the gold industry, which can be significantly affected by international economic, monetary and political developments. The strategy’s overall portfolio may decline in value due to developments specific to the gold industry. The strategy investments in foreign securities involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, or political, economic or social instability. The strategy is subject to risks associated with investments in Canadian issuers, commodities and commodity-linked derivatives, commodities and commodity-linked derivatives tax, gold-mining industry, derivatives, emerging market securities, foreign currency transactions, foreign securities, other investment companies, management, market, non-diversification, operational, regulatory, small- and medium-capitalization companies and subsidiary risks.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future results.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.
666 Third Avenue
New York, NY 10017
800.826.2333
IMPORTANT DISCLOSURES
Token Definitions
Bitcoin (BTC) is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.
Please note that VanEck may offer investments products that invest in the asset class(es) or industries discussed in this podcast.
The views and opinions expressed are those of the speaker(s) and are current as of the podcast’s posting date, and are not necessarily those of VanEck or its employees. Video commentaries are general in nature and should not be construed as investment advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. Any discussion of specific securities mentioned in the video is neither an offer to sell nor a recommendation to buy these securities.
Investing in cryptocurrencies comes with a number of risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. There is no assurance that a person who accepts a cryptocurrency as payment today will continue to do so in the future.
There are inherent risks with fixed income investing. These risks may include interest rate, call, credit, market, inflation, government policy, liquidity, or junk bond. When interest rates rise, bond prices fall. This risk is heightened with investments in longer duration fixed-income securities and during periods when prevailing interest rates are low or negative.
There are inherent risks with equity investing. These risks include, but are not limited to stock market, manager, or investment style. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices.
Commodities are assets that have tangible properties, such as oil, metals, and agriculture. Commodities and commodity-linked derivatives may be affected by overall market movements and other factors that affect the value of a particular industry or commodity, such as weather, disease, embargoes or political or regulatory developments. The value of a commodity-linked derivative is generally based on price movements of a commodity, a commodity futures contract, a commodity index or other economic variables based on the commodity markets. Derivatives use leverage, which may exaggerate a loss. Investments in commodities can be very volatile and direct investment in these markets can be very risky, especially for inexperienced investors.
The Gold strategy is subject to the risks associated with concentrating its assets in the gold industry, which can be significantly affected by international economic, monetary and political developments. The strategy’s overall portfolio may decline in value due to developments specific to the gold industry. The strategy investments in foreign securities involve risks related to adverse political and economic developments unique to a country or a region, currency fluctuations or controls, and the possibility of arbitrary action by foreign governments, or political, economic or social instability. The strategy is subject to risks associated with investments in Canadian issuers, commodities and commodity-linked derivatives, commodities and commodity-linked derivatives tax, gold-mining industry, derivatives, emerging market securities, foreign currency transactions, foreign securities, other investment companies, management, market, non-diversification, operational, regulatory, small- and medium-capitalization companies and subsidiary risks.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future results.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.
666 Third Avenue
New York, NY 10017
800.826.2333