Turn to High Yielding Fixed Income and Gold During Economic Extremes

February 28, 2024

Watch Time 3:00 MIN

David Schassler, Head of Multi-Asset Solutions, discusses the resiliency of the economy, protection against elevated inflation, and opportunities he’s bullish about.

Video Transcript

Hi, my name is Dave Schassler. I'm head of the multi-asset solutions group here at VanEck. Today we're going to talk about the economy, then we're going to talk about what opportunities and risks that we see in the market.

Let's talk about the economy. We've been really pleasantly surprised about the resiliency of the economy. One thing we haven't been surprised about, the resiliency of inflation. We were in the hard landing camp for a long period of time. We're now in the soft landing camp. We think the soft landing is our base case scenario, but we're not taking the hard landing off the table. We're not taking it off the table. We are saying that inflation is going to remain elevated for an extended period of time. More specifically, 3 to 5 percent on average for an extended period of time. Think years, not months. And we think the chances are that inflation re-accelerates if the Fed pivots are really high. So people need to think about protection against a recession. People have to think about protection against an extended period of high inflation.

Equities: Neutral

Let's talk about stocks. This bull may have more room to run, but given the headwinds, it's hard to be excited about equities right now. High inflation, high interest rates, and impending recession, these historically have not been the things that bull markets are made of. That being said, I don't want to bet against the consumer. I don't want to bet against the strong earnings growth coming out of specifically the technology sector.

The market may continue to melt up. So we're not bearish on equities. We're just not excited about them either.

Fixed Income: Bullish

On to fixed income. You're getting high single digit yields on many sections of the fixed income market. A bird in the hand is effectively worth two in the bush. So if you can get a lot of yield, take it. Money in your pocket today is worth more than the potential returns that can come from price appreciation from other asset classes. We're very bullish on high yield right now.

Real Assets: Bullish

And finally, real assets. We're bullish on gold. In our view, this is a perfect time to be invested in gold. The threat of continued inflation is really high. The threat of a recession is really high, whether it be a soft landing or a hard landing. Gold's expected to outperform in both those scenarios. So if you take high inflation and chances of a recession, gold's your go-to asset. It's your key diversifier.

This is a challenging time to manage money. We're moving from one economic extreme to the other. And the impact of higher interest rates in our view hasn't fully been materialized. The good news here, uncertainty creates opportunities. Two opportunities we spoke about, high yielding fixed income. The second one, gold bullion. Those are two assets that we're very excited about.

So I'm Dave Schassler with the Multi-Asset Solutions Group. For more information, go to VanEck.com. Sign up for our newsletter. Thank you so much.

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Investments in commodities can be very volatile and direct investment in these markets can be very risky, especially for inexperienced investors.

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.

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.

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David Schassler

Head of Multi-Asset Solutions