The Middle of a Fiscal Reckoning Revisited: Focus on What We Can See
July 07, 2025
Read Time 4 MIN
Since there are no major policy shifts coming out of the budget bill, despite the 3% reckoning in the U.S., investors should focus on these three investment themes:
- Protection against deficits and debt: Assets like gold and crypto were big winners in the first half of 2025, but remain powerful portfolio diversifiers despite their run-up.
- AI continues to astound: The AI boom is driving corporate profitability potential and demand for energy, infrastructure, and next-gen computing.
- Opportunities in India and Middle East: India’s digital adoption and scale are accelerating its rise as a global growth engine, while Middle East energy and infrastructure stand to benefit from the AI power surge.
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Murky Waters: No Strong Fiscal or Monetary Policy Changes
Despite being in the middle of a period of fiscal overspending, we are not seeing a sharp shift in policy. In addition:
- Deficit math is not precise: Not all details are known, assumptions are important, and some items, like tariff revenue, aren’t even part of deficit calculations.
- Labor market signals are muddled by structural shifts: AI is softening demand for white-collar jobs, while immigration reform could tighten supply—leaving overall employment data difficult to interpret.
- Inflation is a mixed bag: Goods prices are falling, but services inflation remains sticky. Add in rising tariffs, and investors again face a noisy inflation picture.
- Growth looks slower, but profits don’t: While GDP and consumer data suggest economic deceleration, earnings remain resilient—driven by margin expansion and tech-led efficiency. The result is a widening disconnect between macro signals and market performance.
Taken together, these crosscurrents make the current macro environment unusually noisy. For investors, this reinforces the importance of higher-conviction themes.
How to Invest:
- Hold gold and crypto as “hedges” against de-dollarization
- Consider India and Middle East digitization winners as those regions lean into technology
- Consider emerging markets debt - fiscal and monetary discipline in EM contrasts with deteriorating developed markets fundamentals.
AI Continues to Astound
The first phase of the AI trade was dominated by a handful of mega-cap tech giants. Companies like NVIDIA captured outsized gains as foundational model training became the market’s biggest arms race. But now, with infrastructure largely in place and foundational models deployed, the focus is shifting to real-world applications—and to the physical systems required to power them.
The training and deployment of AI models, particularly in high-density data centers, is also consuming exponentially more electricity. This is creating knock-on demand for energy infrastructure: natural gas as a transitional fuel, nuclear as a long-term solution, and power transmission upgrades across the grid.
ChatGPT Downloads Far Outpace All Other Social Platforms
App Store downloads: ChatGPT vs. leading social apps
Source: Similarweb. Data as of June 24, 2025. Any projections, forecasts and other forward-looking statements are not indicative of actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice.
How to Invest:
- Semiconductors: Still Room to Run. Despite a 55%+ surge since April, we believe there’s more upside ahead as demand drivers remain strong.
- Nuclear Energy: Stay Invested. With AI accelerating global electricity needs, nuclear remains a compelling long-term solution.
International is Back, Major Developments
While the last decade was a “lost decade” for emerging markets in terms of performance, we continue to like the new winners--India and the Middle East. India is not only home to the most people in the world, it also has the largest percentage of ChatGPT users in the world. This underscores the country’s rapid digitization, thriving equity market and demographic trends that are creating compelling investment opportunities that we believe investors should be exploring. While India’s economic reforms were implemented years ago, they played out in Q2. Another often-overlooked region is the Middle East. As the AI boom accelerates, the region’s energy resources and infrastructure are well positioned to benefit from the surge in power demand driven by artificial intelligence. The region also struck major AI deals in 2025, despite political conflict.
India++ Share of GDP Will Pass the EU in 10 Years
Source: VanEck Research; IMF; Bloomberg as of 6/30/2023. Past performance is no guarantee of future results. Any projections, forecasts and other forward-looking statements are not indicative of actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice.
How to Invest:
- India: Long-Term Opportunity Remains Strong. While India lagged other emerging markets in the first half of 2025, it remains one of the most compelling long-term investments. Key government reforms are complete, and strong infrastructure is already in place to support continued growth.
Key Takeaways
- Uncertain U.S. debt and deficit solutions call for macro hedges. With risks of fiscal overspending, gold and crypto should be kept as buffers against volatility despite tremendous gains already this year.
- AI expansion creates new winners beyond megacap tech. As foundational models give way to real-world deployment, opportunities are emerging in energy, infrastructure, and the broader AI ecosystem—making this a prime time to reengage with select growth and next-gen tech enablers.
- International is back. India and the Middle East stand out. India’s digital leap and favorable demographics position it as a future economic powerhouse, while rising AI-driven energy demand boosts the investment case for Middle East infrastructure.
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IMPORTANT DISCLOSURES
Please note that VanEck may offer investment products that invest in the asset class(es) or industries included in this blog.
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. 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. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
Emerging Market securities are subject to greater risks than U.S. domestic investments. These additional risks may include exchange rate fluctuations and exchange controls; less publicly available information; more volatile or less liquid securities markets; and the possibility of arbitrary action by foreign governments, or political, economic or social instability.
Global resource investments are subject to risks associated with real estate, precious metals, natural resources and commodities and events related to these industries, foreign investments, illiquidity, credit, interest rate fluctuations, inflation, leverage, and non-diversification.
Gold investments are 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. Investments in gold may decline in value due to developments specific to the gold industry. Foreign gold security investments 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. Gold investments are subject to risks associated with investments in U.S. and non-U.S. 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.
Investments in digital assets and Web3 companies are highly speculative and involve a high degree of risk. These risks include, but are not limited to: the technology is new and many of its uses may be untested; intense competition; slow adoption rates and the potential for product obsolescence; volatility and limited liquidity, including but not limited to, inability to liquidate aposition; loss or destruction of key(s) to access accounts or the blockchain; reliance on digital wallets; reliance on unregulated markets and exchanges; reliance on the internet; cybersecurity risks; and the lack of regulation and the potential for new laws and regulation that may be difficult to predict. Moreover, the extent to which Web3 companies or digital assets utilize blockchain technology may vary, and it is possible that even widespread adoption of blockchain technology may not result in a material increase in the value of such companies or digital assets.
Digital asset prices are highly volatile, and the value of digital assets, and the companies that invest in them, can rise or fall dramatically and quickly. If their value goes down, there’s no guarantee that it will rise again. As a result, there is a significant risk of loss of your entire principal investment.
Digital assets are not generally backed or supported by any government or central bank and are not covered by FDIC or SIPC insurance. Accounts at digital asset custodians and exchanges are not protected by SPIC and are not FDIC insured. Furthermore, markets and exchanges for digital assets are not regulated with the same controls or customer protections available in traditional equity, option, futures, or foreign exchange investing.
Digital assets include, but are not limited to, cryptocurrencies, tokens, NFTs, assets stored or created using blockchain technology, and other Web3 products.
Web3 Companies include but are not limited to, companies that involve the development, innovation, and/or utilization of blockchain, digital assets, or crypto technologies.
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 Associates Corporation.
IMPORTANT DISCLOSURES
Please note that VanEck may offer investment products that invest in the asset class(es) or industries included in this blog.
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. 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. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.
Emerging Market securities are subject to greater risks than U.S. domestic investments. These additional risks may include exchange rate fluctuations and exchange controls; less publicly available information; more volatile or less liquid securities markets; and the possibility of arbitrary action by foreign governments, or political, economic or social instability.
Global resource investments are subject to risks associated with real estate, precious metals, natural resources and commodities and events related to these industries, foreign investments, illiquidity, credit, interest rate fluctuations, inflation, leverage, and non-diversification.
Gold investments are 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. Investments in gold may decline in value due to developments specific to the gold industry. Foreign gold security investments 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. Gold investments are subject to risks associated with investments in U.S. and non-U.S. 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.
Investments in digital assets and Web3 companies are highly speculative and involve a high degree of risk. These risks include, but are not limited to: the technology is new and many of its uses may be untested; intense competition; slow adoption rates and the potential for product obsolescence; volatility and limited liquidity, including but not limited to, inability to liquidate aposition; loss or destruction of key(s) to access accounts or the blockchain; reliance on digital wallets; reliance on unregulated markets and exchanges; reliance on the internet; cybersecurity risks; and the lack of regulation and the potential for new laws and regulation that may be difficult to predict. Moreover, the extent to which Web3 companies or digital assets utilize blockchain technology may vary, and it is possible that even widespread adoption of blockchain technology may not result in a material increase in the value of such companies or digital assets.
Digital asset prices are highly volatile, and the value of digital assets, and the companies that invest in them, can rise or fall dramatically and quickly. If their value goes down, there’s no guarantee that it will rise again. As a result, there is a significant risk of loss of your entire principal investment.
Digital assets are not generally backed or supported by any government or central bank and are not covered by FDIC or SIPC insurance. Accounts at digital asset custodians and exchanges are not protected by SPIC and are not FDIC insured. Furthermore, markets and exchanges for digital assets are not regulated with the same controls or customer protections available in traditional equity, option, futures, or foreign exchange investing.
Digital assets include, but are not limited to, cryptocurrencies, tokens, NFTs, assets stored or created using blockchain technology, and other Web3 products.
Web3 Companies include but are not limited to, companies that involve the development, innovation, and/or utilization of blockchain, digital assets, or crypto technologies.
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 Associates Corporation.