Plan for 2025: Predictions from Our Portfolio Managers

CEO Jan van Eck recently outlined four pivotal macroeconomic trends shaping the investment landscape heading into 2025:

1. The U.S. faces a fiscal reckoning, with potential government spending cuts and persistent inflation risks underscoring the importance of diversified equity portfolios and robust inflation hedges.
2. Bull markets in gold and bitcoin may gain momentum, driven by inflationary pressures, fiscal uncertainty, and de-dollarization trends, making these assets essential for inflation protection.
3. Advancements in artificial intelligence (AI) are expected to drive significant growth beyond the tech sector, increasing electricity demand and creating investment opportunities in energy—particularly nuclear and natural gas—infrastructure, and utilities.
4. International equities present compelling opportunities, with India leading the way through rapid economic expansion and attractive valuations, while selective investments in China and other markets also warrant consideration.

To complement these macro-level insights, we asked our portfolio managers to share their outlooks for their respective asset classes and highlight the most significant investment opportunities. Their insights below provide a view across various asset classes, offering guidance to empower your investment decisions for the year ahead.

• Gold: Outlook Remains Bright for 2025
• Natural Resources: Poised for Growth with Economic Recovery and Lower Rates
• Emerging Markets Bond: Well-Positioned Amid Global Stimulus and High Yields
• Emerging Markets Equity: Focus on Fundamentals Amid Broader Uncertainty
• Fixed Income: Up in Quality, Down in Duration, Ready for Opportunities
• Municipal Bonds: Resilient, Robust, and Ready for 2025
• Digital Assets: New Highs, Expanding Use Cases and Growing Adoption

Gold: Outlook Remains Bright for 2025

Imaru Casanova

Portfolio Manager, Gold and Precious Metals

Outlook

We maintain a positive outlook for gold as we head into 2025, supported by strong fundamentals. Many of the catalysts that drove gold to record highs in 2024 remain in place:

• Elevated Central Bank Buying: Although central bank purchases in 2024 may not match the record levels seen in 2022 and 2023 (the highest in over 50 years), we are on track for the 15th consecutive year of net purchases. Several central banks have announced plans to increase gold holdings (e.g., Poland is aiming for gold to be 20% of its total reserves).
• Improving ETF Investment Demand: ETF demand for gold bottomed out in April 2024, marking 11 months of outflows and hitting its lowest level (in ounces) since January 2020—despite gold delivering an impressive 9.25% annualized return during the same period. Since May, ETF holdings have gradually increased, signaling renewed investor confidence and growing exposure to gold.
• Geopolitical Uncertainty: Geopolitical risks continue to rise, with ongoing conflicts (e.g., Russia-Ukraine), heightened tensions in the Middle East, political instability in countries like France and South Korea, and emerging trade disputes among the U.S., China, Mexico, and Canada. These uncertainties add volatility to the markets, driving investors toward safe-haven assets like gold.

Investment Opportunities

Gold miners represent the most compelling opportunity in the gold sector. Despite higher production costs, gold miners are generating significant free cash flow, with implied margins exceeding $1,000 per ounce of production.

Companies with strong business models, high-quality assets, and proven execution capabilities are not receiving due recognition in the form of higher market multiples. This disconnect presents a notable opportunity, which we expect will correct over time.

The primary challenge lies in shifting investor attention away from high-profile sectors like AI, cryptocurrency, and the "Magnificent Seven" stocks. A market correction or a pause in these sectors could prompt investors to explore alternative opportunities—and gold miners are well-positioned to capture this interest.

Explore more Gold Insights.

Natural Resources: Poised for Growth with Economic Recovery and Lower Rates

Shawn Reynolds

Portfolio Manager, Global Resources

Outlook

The natural resource sector demonstrated remarkable resilience in 2024, despite challenges from high interest rates, sticky inflation, and subdued demand from China, the world's largest commodity consumer. Prices for many commodities held steady or reached all-time highs, even amidst supply overhangs from OPEC+ and new production sources. As we move into 2025, the outlook is optimistic, supported by the anticipation of lower interest rates, China’s economic recovery, and persistent geopolitical risks balancing oversupply concerns. These factors suggest a more favorable supply-demand dynamic for most commodities in 2025, creating a healthier market environment.

Natural resource companies have also evolved, emphasizing prudence and disciplined capital allocation over unchecked growth. This operational shift has brought stability to the sector and positioned it for stronger performance. Lower interest rates, substantial stimulus in China, and ongoing geopolitical risks may further enhance equity valuations. Historical trends support natural resource equities’ ability to outperform during periods of economic growth and inflation, aligning with their potential for long-term portfolio diversification and returns.

Investment Opportunities

Investment opportunities vary across sub-sectors. Metals and mining may see consolidation-driven growth as new mine development wanes, while demand benefits from global electrification and economic recovery in China. Traditional energy, particularly natural gas, stands to gain from structural demand shifts driven by AI and electrification trends. Agriculture may reflect moderating grain prices but face high prices for select soft commodities, and transitional resources will continue their steady growth, bolstered by sustained incentives under refined U.S. policies like the Inflation Reduction Act. Together, these dynamics suggest a broad array of opportunities across natural resources in 2025.

Explore more Natural Resources Insights.

Emerging Markets Bond: Well-Positioned Amid Global Stimulus and High Yields

Eric Fine

Portfolio Manager, Head of Active Emerging Markets Debt

Outlook

Our outlook for emerging market bonds is constructive. In particular, global and idiosyncratic fundamentals will be supportive of EM, and EM credit spreads and real yields are too high relative to these fundamentals. To our eye, key growth-positive global macroeconomic drivers will be U.S. stimulus (e.g., tax cuts, along with structural measures such as deregulation), combined with also-still-evolving Chinese stimulus. Such demand would have positive implications, of course, for commodities prices and for emerging market commodity exporters in particular. On U.S. stimulus, one could say it is impossible to predict given the incoming Trump administration’s lack of policy specifics, particularly the relative role of tariffs. However, our general expectation is that guardrails are already in place, in the form of markets with a market-sensitive attitude in the U.S. government. In other words, the new administration does not want to do anything that blows up stock markets.

Now, tariffs are an obvious challenge for China, but we’ve already been conditioned by President-elect Trump’s initial indication (some might say negotiation tactic) of 10% additional tariffs (and 25% on Mexico and Canada). But even here, our general expectation is that the actual negotiations will be between two countries whose markets (and whose respective government’s domestic political objectives of growth), will lead to something better than expected. What is “expected” is arguably hard to assess, because the Chinese exchange rate is managed. But what’s remarkable about 2024 is how stable the Chinese currency has been, and this is the only serious transmission mechanism to EM. It’s why EM Asian bonds have been particularly stable in 2024, for example. Finally, these dual stimuli look likely to be coming when the Fed continues to cut policy rates in 2025. A growthy-world plus Fed rate cuts is a formula for good performance in EM bonds, particularly those on the riskier end of the spectrum.

Investment Opportunities

The biggest opportunities are in high yield (HY) sovereign bonds in USD, and in selected high-yielding local-currency bonds. Many HY sovereigns benefit from commodities demand, especially many in sub-Saharan Africa, a region that is replacing Russia as a major commodities-supplier to Europe, for example. Yields in USD can range from 8-10% there. There are also many local currency markets that have high interest rates relative to inflation. South Africa pays 11% yields in local currency, despite inflation around 3% and being a big beneficiary of the stimulus we mention above. Mexico pays 10.5% yields, with inflation around 4.5%, and a currency that has already arguably priced/discounted tariff risks coming from the incoming U.S. administration.

Explore more Emerging Markets Bonds Insights.

Emerging Markets Equity: Focus on Fundamentals Amid Broader Uncertainty

Ola El-Shawarby, CFA

Portfolio Manager, Emerging Markets Equity

Outlook

Emerging markets equities are entering 2025 with a dynamic mix of opportunities and challenges, underscoring the importance of a selective, high-conviction approach. While certain risks remain, the potential for strong returns is clear for investors focused on quality and long-term growth drivers, particularly considering attractive valuations and investors’ under-allocation to the EM equity space.

The risk of increased tariffs is currently a key consideration, with potential U.S./China trade restrictions and uncertainty around U.S./Mexico relations under the Trump administration creating some near-term volatility. Additionally, if inflationary pressures from U.S. policies result in a delay in the anticipated rate-cutting cycle or cause a stronger U.S. dollar, emerging markets could face headwinds. However, these scenarios also highlight the value of focusing on markets and sectors that are less exposed to such pressures.

On the positive side, China’s pro-growth stimulus measures are providing critical support to its domestic economy, helping to stabilize broader emerging market sentiment. India remains a standout, with its robust structural growth story driven by domestic consumption, ongoing reforms, and expanding opportunities in manufacturing and technology. Across the board, sectors like digital transformation, financial inclusion, formalization of consumption, and renewable energy offer exciting, long-term growth potential.

Investment Opportunities

In this environment, the focus on high-quality companies with durable earnings and strong fundamentals is more important than ever. Active stock selection, grounded in deep research and disciplined risk management, allows investors to navigate global uncertainties while capturing the significant upside potential in emerging markets. With the right strategy, 2025 presents a promising landscape for thoughtful investors ready to take advantage of the opportunities ahead.

Explore more Emerging Markets Equity Insights.

Fixed Income: Up in Quality, Down in Duration, Ready for Opportunities

Fran Rodilosso

Head of Fixed Income ETF Portfolio Management

Outlook

Credit investors love to worry. Our team has spent a great deal of time looking for the canary in the coal mine within the credit space. Yet over the past two years, credit markets have withstood bouts of extreme rate volatility, a slow-moving train wreck in certain pockets of the commercial real estate sector, a mini crisis in the regional banking sector, quantitative tightening and so on. As 2024 ends, investment grade credit spreads are at all-time lows and high yield spreads are within striking distance. We contend that underlying fundamentals for the U.S. private sector, backward looking as they might be, can justify current levels. Lower default rates and high upgrade/downgrade ratios reflect the positive credit environment. Certainly, technicals have played a role as well, with excess cash chasing yields down the credit and liquidity spectra. We have consistently held the view throughout 2024 that absolute yields across corporate credit, emerging markets, and structured credit offer meaningful protection through current income, helping to cushion price losses from moderate spread widening, and are therefore likely to continue attracting investor capital. Thinking from a portfolio allocation and relative value perspective, we also believe that equity valuations, which at current levels should lead to lower expectations for future returns on equities, argue for making a robust and diversified allocation to fixed income.

Investment Opportunities

Looking at 2025, our favored positioning is the following:

• Overweight shorter duration in dollar based fixed income to take advantage of higher yields and higher correlation to the direction of Fed target rates.
• Up in quality within corporate and structured credit as the risk/reward for extending credit risk has been diminished.
• Opportunistic addition of emerging markets exposure, where in many cases sovereign debt fundamentals are lot more friendly than those of developed countries, including the U.S.

The basis for our duration call is not the number of cuts we believe the Fed will deliver next year (at least three is probably still in the cards), but rather on a combination of sustained U.S. growth and potential for renewed inflationary pressures (tariffs and immigration policy heighten this concern) on top of an increasingly worrying fiscal reality for the U.S. that renders long-term Treasuries less attractive. Our preferred credit positioning reflects, as we allude to above, valuations rather than fundamentals. We believe that an up-in-quality approach to credit will afford investors greater flexibility to pivot and add risk if and when a credit event occurs in 2025 and/or when the technical strength in the market reverses.

We believe an allocation to CLOs, particularly within the investment grade tranches, remains an effective way to earn comparatively high yields while managing down both duration and credit risk exposure. Investment grade floating rate notes accomplish a similar goal, while fixed rate investment grade corporate bonds are our preferred means of adding some duration and/or high-quality credit exposure to portfolios. Among other fixed income asset classes, we would maintain existing allocations to high yield and emerging markets debt—the additional yield and diversification benefits are present in both—and would look for opportunities to add risk when rate volatility or a market event drives spreads higher.

Explore more Income Investing Insights.

Municipal Bonds: Resilient, Robust, and Ready for 2025

Tamara Lowin

Senior Municipal Credit Analyst

Outlook

We expect strong performance from municipal bonds in 2025 due to record new issuance and sustained demand. Lower interest rates are bringing borrowers back to the market and we anticipate capital improvement and infrastructure projects to lead the way. Combined with strong demand across the credit curve, we envision opportunities to strategically rebalance portfolios. Investors will have the opportunity to be more selective, driving performance particularly in high yield.

Tax policy uncertainty is unlikely to resolve in the first year of the new presidential administration and municipal bonds will continue to provide stable and liquid investment grade opportunities for concerned investors – even with rumors of tax exemption changes on future municipal bonds. We do not expect a wholesale loss of the tax exemption in 2025, but those concerned with future access to tax-exempt municipal bond income will drive up demand further (read more here: What Trump’s Presidency Means for Municipal Bonds).

Investment Opportunities

Municipals will offer strong and diverse opportunities for tax-conscious investors in 2025. New issuance will be robust across states and in most sectors, particularly focused on larger infrastructure projects. We expect increased new issuance from existing borrowers to enrich the market and liquidity, as they borrow for re-fundings and new projects in both the investment grade and high yield space.

Explore more Municipal Bonds Insights.

Digital Assets: New Highs, Expanding Use Cases and Growing Adoption

Matthew Sigel

Head of Digital Assets Research

In 2025, we anticipate new all-time highs for Bitcoin and Ethereum, as well as accelerating U.S. adoption of Bitcoin. Tokenized securities may also experience explosive growth, while stablecoin settlements may reach $300 billion in daily volumes, reflecting increased trust and utility in the digital asset ecosystem.

For a more in-depth look at these and predictions relating to decentralized finance, Layer-2 solutions for Bitcoin, AI-driven on-chain activity and NFTs, read: VanEck’s 10 Crypto Predictions for 2025.

Explore more Digital Assets Insights.

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