If you look at government spending, monetary policy, and technology, we do know a lot about what's going to be happening in 2026 already. Federal fiscal deficits as a percent of GDP is on a healthy downward trajectory. So it peaked over north of 6 and a half percent two years ago. It was just south of 6 percent last year. We think it's going to be below 5 and a half percent going into this year. One of the things that Bessant said as well though is he said interest rates today are normal. And what that suggests to me is that he was not laying the groundwork for someone to come in and drive short-term interest rates from 3 and a half percent to 1 percent. Token demand is exploding. I don't think those numbers are released a whole lot anymore by the hyperscalers, but I think it was like 38 times from the summer of 2024 to summer of 2025.
Hi Jan, welcome to Excess Returns.
Thank you. It's great to be here. As CEO of VanEck, you oversee an innovative and a very influential ETF and asset management firm. You're home to some of the industry's well-known and widely used ETFs, including the VanEck Gold Miners ETF, the VanEck Wide Moat ETF, and many other stock, bond, and crypto ETFs and investment strategies. Um, you've described...
Semiconductors. That's the biggest one. That's right. But yeah, a lot of different I mean dozens of ETFs and strategies, some of the first in some of these more focused areas of the market but areas that advisers and investors clearly want exposure to and are important in terms of building diversified investment portfolios.
So what we want to do with you today is kind of have you on. I mean, you're sort of like this very influential person in the ETF landscape and sort of talk through how you're thinking about the markets, how you're thinking about developing ETFs and building new investment strategies and sort of cover a wide range of topics with you today. So thank you for taking the time and sharing your time with us and our audience.
No, it's my pleasure, my honor. So you've described the firm as having a few different very important key pillars that inform the macro perspective and how you go about trying to take advantage and exploit these global trends in the market. Those are government spending or fiscal policy, monetary policy, and technology. So I thought to start it would just be good, a little inside baseball, to hear how a firm like yours sort of takes that macro view and translates that into product development and themes.
Yeah, sure. Thank you. Let me try to elaborate on those words a little bit because everyone talks about government policy and technology, right? I think what we bring is because we appreciate history, we think the future can actually change much more radically and much more quickly than people think about. So we try to look at some of these macro forces, like the rise of China as this huge magnet. It's a reality outside the financial markets, but it will pull and stretch the financial markets. So that's a little bit more description on how we look at the world. From an investor perspective, the phrase that people key in on is asset allocation is really important to returns. But like VanEck, we like to point out that some asset classes didn't used to exist. When I started my career, emerging markets wasn't an asset class. People look at real assets and gold, some people think it's an asset class, some people don't allocate to them at all. So what we like to do is engage with clients and investors about how they're thinking about those very important things to their portfolio.
Yeah, that's great. No, I think we will get into a lot of that today. But where I think we wanted to maybe start with you is you recently put out your 2026 outlook and the title of that piece was 'Visibility Should Mean Risk On.' So what is creating that visibility and why are you optimistic as we head into this new year?
Yeah. Maybe those words were dead on arrival faster than any other quarterly outlook I've done. Not that I've changed my view, but they require a lot more explanation given some of the headlines that have been hitting the newspapers. So primarily, if you look at government spending, monetary policy, and technology, we do know a lot about what's going to be happening in 2026 already. As far as government spending is concerned, there's not going to be a big bill out of Congress. The big beautiful bill comes into effect this year. The trajectory of fiscal deficits as a percent of GDP is on a healthy downward trajectory. It peaked over north of 6 and a half percent two years ago. It was just south of 6 percent last year. We think it's going to be below 5 and a half percent going into this year. That brings us out of the fiscal danger zone we had a couple of years ago towards a trajectory that's becoming more easy for us to swallow. You saw the 10-year interest rates, which are a good measure of that, end up the year at the 4.1 to 4.2 level as opposed to the 4.8 level. So that's government spending. Monetary policy: we're going to have a new Fed chair in May. But I think Scott Bessent at the end of last year gave a very clear roadmap of a Federal Reserve that's going to be less interventionist. He sort of made fun of the Fed during the post-COVID era, saying that was a gain of function Fed, meaning that monetary stimulus and the Fed balance sheet was way too big for too long supporting the financial markets leading to inflation. For the new Fed chair, they will follow the Trump-Bessent philosophy of a smaller, less interventionist Fed. The interesting thing is that investors have almost come to expect that the Fed is going to be there as a rescue mechanism for the markets when things get tough. Bessent is signaling something very different.
Well, he said, look, let me be clear. He did say that if there's a liquidity crisis, the Fed needs to step in. Okay?
And he quoted a European central bank saying it's great they did that for two or three months, but we did that for two or three years. As every American knows, that drove asset prices up, drove the stock market up, but it drove the prices of houses up a lot too. Bessent really laid a sound, coherent foundation for what's going to be... the Senate needs to approve Trump's nominee for the Fed. He gave a really good philosophical explanation, which I think really does matter. Regardless of who they end up picking, the philosophy of who they pick is also going to be clear. One of the things that Bessent said as well though is he said interest rates today are normal. What that suggests to me is that he was not laying the groundwork for someone to come in and drive short-term interest rates from 3 and a half percent to 1 percent, which is how you could interpret some tweets from President Trump. So if he thought they were already normal, then the market is correctly expecting a quarter point, half a point, three-quarters of a point on the short end. My point is we have a lot of visibility there shouldn't be some kind of adverse extremely tight monetary shock.
Do you have any sense if that is true about the Fed being less interventionist, how that kind of trickles down into the areas of the market it might impact? Like maybe active strategies might do a little bit better if that is in fact the case, or just how does that flow through in terms of how investors should think about it at a portfolio level?
Yeah, I don't know. That's a great question. But if the ten-year doesn't change a lot and the short term only drifts down a little bit, I don't think that should help the financials on the margin, but otherwise I'm not really sure it'll have a big sector impact. So I would say probably not. I love by the way that you're clearly a podcast guy and researching you because it talks about you listening to a lot of podcasts. I think the best interview you talked about was the All-In podcast, which is the one that got my attention.
That's the one that got my attention and I sometimes shed that out on social media and I listened to it like three times because I really think this is very important. When the Secretary of the Treasury writes an article and repeats the same message over and over again, you got to listen. One of the things I learned from my father is just when important people say something, listen because they're really likely going to do what they say.
And it's cool too, because we're used to when I was growing up in markets, it was like these two-minute sound bites on CNBC, and now you can hear these people who are making policy decisions talk for an hour. It's just really cool. You learn so much from doing that.
I love the long form content. Also, a lot of what I try to fight against in my quarterly outlooks is the headlines we see in the media all the time. What does the media want to talk about? Which Kevin is it? Exactly who is being picked? If you take a step back and realize all those candidates fit within one philosophy, we kind of know what's happening and focus less on the personalities. That's why I think the long form content really helps.
You mentioned the Fed renovations and that gets to a broader issue of independence. We've been talking about a lot on the podcast. We've had some guests who were extremely worried about Fed independence given what's going on and some who say it doesn't really matter in terms of policy that much. Do you have any thoughts on that?
Yeah, I'm not worried. If you look at the history of the Fed, it's only been around 110 years, so there's always politics around interest rates. It's a little bit bare-knuckled politics, but nothing like... I am not worried because at the end of the day, the Senate needs to approve the Fed chair, and the Fed chair is only one vote on the Open Market Committee. What's more important is are they persuasive. I just don't see a major restacking of the Fed that's been proposed.
Before we dig into your outlook a little bit more, I want to talk at a high level because one of the things you did that was cool in here is it's very clear you guys are thinking in very long-term time frames when you think about macro. You're thinking about long-term trends, comparing and contrasting your outlook with other ones I've read, like you're thinking about 10, 20, 30 years down the road and what are these big trends and how can we take advantage of them. So can you talk about why you think that way?
Yeah, because I think some of these longer trends actually give you higher conviction. One of the ones I talk about is the projections that India at their current growth rate will be the size of continental Europe in 10 years. That is a profound reshaping of the world economy, but also political power and monetary systems. They keep doing free market reforms. Sure, it could not happen, but I think the chances are super high. Compare that to something shorter term: do we know what the Indian stock market is going to do in January 2026? No idea. Q1 2026, no idea. So when you focus on a few really important trends in the world over a longer time, you can have much greater conviction. And as I said, should it affect your asset allocation? Yes. Most people allocate to international markets based on some current day index, not where things are going. So I like to overweight India. That's the bottom line of that rant.
100%.
How do you think, you mentioned the deficit before and you mentioned that it's getting better. What do you think is causing that? I guess to some extent economic growth is good for the deficit. Tariffs have generated some revenue. Do you think those are longer term sustainable things that we're seeing in terms of the deficit going down?
I think it's really just what you mentioned but tariff revenue. Let me talk about something that people don't talk about at all that I was thinking about this weekend, which is the Ukraine war. The Trump administration is trying to save money wherever it can. It hit a political brick wall with DOGE and so they don't talk about it at all. But think about the Ukraine war: we used to be lending money to Ukraine or sending them weapons. We were writing checks for the Ukraine war. We're not writing checks anymore; Europe is writing checks. So we're saving that money. I don't know where that money savings is going, but it was like tens and tens of billions somewhere, I think the number was between $50 and $100 billion a year. That's a lot of money. Also, whether the fraud or welfare fraud adds up to savings, the healthcare thing: they risked a government shutdown to not extend the increase in benefits in the ACA program that Biden put in place. Everywhere I look, I see them trying to save $10, $20 bills. That adds up. The biggest change is the tariff revenue, which is like $300 billion or more. That's what's bending the curve. I'm way out there in my outlook with numbers below 5.5% even 5.3% of GDP this fiscal year. But who knows. We're the more bullish people on Wall Street.
So when you think about the economy, are you bullish as well? It seems like we have pretty reasonable growth right now. Inflation is above target but not that high. Do you feel good that we're kind of in this Goldilocks environment right now?
Yeah. So again, going back to fiscal and monetary. I used to say after COVID, we had two feet on the gas pedal. We were spending a lot of money, both fiscal and monetary policy were stimulative. When the Fed raised rates in 2022, everyone said we're going to have a recession. But we had both feet on the gas. Now we're having a slight trade-off. Fiscal stimulus is coming down as a percent of the economy and monetary stimulus is slightly going up. Interest rates are slightly going up. It's a slow-moving shift that I don't think net net will be negative for the economy. It's much healthier in the long term to not be spending so much money.
So I was excited to talk to you about AI because I know you've looked into it a lot and it's something that excites me just because I'm using it so much day to day. And I think all of us have this tendency to try to rank these things in history: railroads, internet, AI. I know you rank AI towards the top, second biggest technology in American history after railroads. So can you just talk about how you're thinking about AI and what it's going to mean for the economy and for all of us?
Yeah, I think the one thing I would say is remember the VanEck philosophy: look away from the financial markets. What's actually happening on the technology front? To oversimplify it, token demand is exploding. I don't think those numbers are released a whole lot anymore by the hyperscalers, but I think it was 38 times from summer 2024 to summer 2025. CEOs will say we can't predict it; it's insane. So the demand for compute is huge. That's what drives our thinking. If you look at quarterly numbers, last week we saw TSMC, the company in Taiwan that makes the chips, again a positive earnings surprise and their stock is at all-time highs. Based on what I've heard on your podcast, that doesn't surprise people paying close attention. There is an acute compute shortage. If TSMC is printing record earnings, guess Nvidia, they're locked together, they're going to have a good quarter too. So if you look at the biggest players, that's consistent with what you all have talked about. Let me also talk about Q4. People ask about OpenAI. I say the marginal players in this compute phenomenon got their teeth kicked in in Q4: Oracle stock, CoreWeave stock, the Bitcoin miners, all the riskier leveraged end of the compute buildout. The stock market took out its own trash. It repriced the risk associated with the OpenAI ecosystem. I'm happily a buyer of Nvidia because as its earnings go up and its stock price stays flat, it's getting cheaper on an earnings basis.
Yeah, and I think you could argue what happened in Q4 was healthy. In a bubble, you don't see differentiation between companies; you see everything going up, like Pets.com. So it's probably healthy long term for AI that differentiation is happening.
