On July 11, Jan van Eck, CEO of VanEck Associates, appeared on CNBC’s “Closing Bell Overtime” to discuss the performance of small-cap stocks, recent movements in the crypto market, and more.
Small-Cap Performance
Market Reaction and Government Spending: Van Eck started by addressing the significant rise in the Russell 2000, which saw its best day since December, gaining over 3%. He emphasized the uncertainty of whether this rise marks the beginning of a sustained trend or just a one-day reversal.
Van Eck pointed out that the substantial government spending has been a major force in the U.S. markets and economy. He believes this spending, combined with very low unemployment rates, has prevented a recession this year and kept interest rates from falling. He expressed the belief that the Federal Reserve is under pressure to be stimulative due to these factors.
Fiscal Policies and Their Impact: He also noted the upcoming fiscal challenges, particularly the potential changes in tax policies depending on the outcome of the elections. The Trump-era tax cuts are set to expire, and their future will significantly depend on the elected officials. He suggested that this scenario puts additional pressure on the Federal Reserve to ease monetary policy, which could be beneficial for small-cap stocks.
Cryptocurrency Market
Bitcoin’s Volatility: Van Eck discussed the recent movements in the Bitcoin market, noting its characteristic volatility. He mentioned that Bitcoin’s spike followed by a drop on the same day was unusual but understandable within the context of its nature as a risk asset. Despite these fluctuations, he remains bullish on Bitcoin, citing long-term fundamentals such as the halving event and the Federal Reserve’s easing policies as bullish factors.
Government and Market Dynamics: He pointed out some specific short-term pressures on Bitcoin, including selling from the German government and the Mt. Gox liquidation. Despite a recent 20% correction, he views this as normal within a bull market. Van Eck stated that VanEck Associates maintains a long-term investment strategy and pointed out that all the US-based spot Bitcoin ETFs had continued seeing a continuous drip of inflows from retail investors.
Gold Market
Record Highs and Geopolitical Tensions: The discussion also covered the gold market, where prices have been trading at record highs. Van Eck attributed this to geopolitical tensions and the trend of central banks buying gold instead of bonds or treasuries. He noted that there haven’t been significant inflows into U.S.-based gold ETFs, with most of the buying coming from foreign central banks.
Alternative Safe Havens: He highlighted the declining appeal of other traditional safe-haven currencies like the Swiss franc, euro, and yen due to various economic weaknesses. He says this makes gold and Bitcoin attractive alternatives for investors seeking stability.
Future Outlook
2025 Fiscal Reckoning: Looking ahead, Van Eck mentioned the potential fiscal challenges in 2025, particularly the looming Social Security issues in the U.S. He predicted that these problems would likely be addressed after the presidential election. He expects the Federal Reserve’s easing policies to continue, which would support both gold and Bitcoin.
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