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Outlook


JIM COLBY: The second quarter of 2014 is likely to differ from last year in a couple of significant ways. We had positive momentum build in the first quarter of 2014; hopefully it will continue. What we may not have to worry about in 2014 is tapering, or the sudden rise of interest rates that occurred last May and June and threw the fixed-income markets into disarray. Now we have a platform where we believe the Federal Reserve is going to modestly adjust its quantitative easing and provide us with a stable platform going forward with respect to interest rates.  


 

Fed Policy


COLBY: What the Fed does in this next quarter matters because of expectations.  Fixed-income markets were thrown into disarray last year because of the Fed's prospects of tapering, i.e. the removal of a certain amount of quantitative easing from its policies. What the Fed does here under Janet Yellen in the second quarter of 2014 will go a long way to determine whether we have stability in the fixed-income markets for the remainder of the year.  Fed policies are key not only to the United States, but also to global stability in terms of fixed income.


2014 Performance


My view on China is that there are some rocky roads ahead. There are pockets of the economy where leverage is excessive, but China is a very large economy and more diversified than what may be reflected in its equity indices. Corporate defaults do not mean that all corporations in China are over-leveraged or are unable to pay their debts. China is a country that bears watching and brings certain risks and opportunities. That's our message on emerging markets: when there's bad news, emerging markets tend to re-price more quickly than we as investors would like to see. Those re-pricings do bring in compensation for some of the risks that are being taken.


 

High Yield

COLBY:  So far this year (as of 3/19/2014), in addition to general performance gains in the municipal marketplace, high yield has rallied. High yield is rallying for a couple of reasons. Last year assets left the industry and assets left many of the high-yield funds, creating an oversold condition. My view is that going into the end of this first quarter and into the second quarter of 2014, investment advisors and other institutional investors may recognize this oversold position and having looked at the relative valuations of high-yield to investment grade, have concluded that the valuation is there.  The yield that's delivered right now in the high-yield spectrum is equivalent, if not greater than, that of any other high-yield product that you're going to find in fixed-income.


 

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IMPORTANT DISCLOSURE


The views and opinions expressed are those of the speaker and are current as of the video’s posting date. Video commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. All performance information is historical and is not a guarantee of future results. For more information about Van Eck Funds, Market Vectors ETFs or fund performance, visit vaneck.com. Any discussion of specific securities mentioned in the video commentaries is neither an offer to sell nor a solicitation to buy these securities. Fund holdings will vary. All indices mentioned are measures of common market sectors and performance. It is not possible to invest directly in an index. Information on holdings, performance and indices can be found at vaneck.com  


Municipal bonds are subject to risks related to litigation, legislation, political changes, local business or economic conditions, conditions in underlying sectors, bankruptcy or other changes in the financial condition of the issuer, and/or the discontinuance of the taxation supporting the project or assets or the inability to collect revenues for the project or from the assets. Bonds and bond funds will decrease in value as interest rates rise. Municipal bonds are also subject to credit risk, interest rate risk, call risk, lease obligations and tax risk. The market for municipal bonds may be less liquid than for taxable bonds. There is no guarantee that the Fund’s income will be exempt from federal or state income taxes or the alternative minimum tax. Federal or state changes in income or alternative minimum tax rates or in the tax treatment of municipal bonds may make them less attractive as investments and cause them to lose value. Capital gains, if any, are subject to capital gains tax. For a more complete description of these and other risks, please refer to each Fund’s prospectus.


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Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market. You will incur brokerage expenses when trading Fund shares in the secondary market. Past performance is no guarantee of future results. Returns for actual Fund investments may differ from what is shown because of differences in timing, the amount invested, and fees and expenses.


 

 

 

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