The 2 areas to invest in to take full advantage of inflation

Sarge986 LLC President Stephen “Sarge” Guilfoyle foresees two dominant macro trends that play a great role in influencing the market (^DJI, ^IXIC, ^GSPC) and whether stocks can hold onto the current rally.

Guilfoyle joins Julie Hyman on Asking for a Trend to elaborate on the areas he is investing, taking advantage of the high inflationary environment: the utilities sector (XLU) and precious metal commodities such as gold (GC=F), silver (SI=F), and copper (HG=F).

"As AI goes, as bitcoin (BTC-USD) goes on, as electric vehicles go on, the demand for electricity isn't going to be what it's been. Demand for electricity nationwide has gone up, maybe like less than 0.5% a year for a number of years," Guilfoyle explains. "From here on out. I think they're expecting 2 to 3% growth per year. so this is going to be an ongoing thing. You're not going to pay a low price for electricity, I don't think, probably for a long time."

For more expert insight and the latest market action, click here to watch this full episode of Asking for a Trend.

This post was written by Luke Carberry Mogan.

Video transcript

The S and P 500 NASDAQ both closing a new records to start the week and momentum feels pretty bullish, maybe ahead of invidious quarterly results.

But beyond A I, our next guest sees two trends at play when looking at the wider market, steadily rising prices and a broad weakening of the US economy sounds ominous.

Sure, but no need to panic.

Here's how to play it.

I'm here with veteran trader Steven Sarge, Gilfoyle, Sarge.

It is good to see you.

So as we look at uh this inflation issue, how should investors be thinking about it?

All right.

So I I see the economy is evolving from reflation which we've been into, into a period of stagflation which is inflationary without that much economic growth.

All right.

So what what I'm seeing here is you need to price in inflation into your book.

Now, now this is, this is more of a tre trend trade than it is in an investment.

So what I'm doing here rather than put my standard target price panic point, that whole all of a I usually explain when I, when I explain what I do, this is more where I'm trading the trend as the trend moves on.

So it's not really a target price, panic point type of thing.

It's more of a of a fluctuating ongoing thing.

The main, the main theme here I would say in order to combat inflation is the commodities trade that you've seen.

Uh gold, silver, copper, uranium.

I'm in, I'm in the ETF S that represent all of these places as well as the physical and silver and gold, as well as electricity.

I think you have to be in utilities because as A I goes on, as Bitcoin goes on as electric vehicles go on, the demand for electricity isn't going to be what it's been, it's been demand for electricity nationwide has gone up maybe like less than five per 0.5% a year for a number of years from here on out.

I think they're expecting 2 to 3% growth per year.

So this is going to be an ongoing thing.

You're not going to pay a low price for electricity, I don't think probably for a long time.

So in other words, you're saying pinpoint some of the areas that are going to have consistent inflation actually and sort of lean into that and figure out the best ways to play that.

Oh, yeah.

Yeah.

And I think what I'm doing right now is I'm, I'm maintaining a core position in all these et I've had a few other names like, like Freeport Mac Moran, uh Southern U to utility those kind of things.

So I keep a small core position but as on days where they're up a lot, I sell some on days where it doesn't work.

I try to buy it back.

So it's, it's really a rolling ball of wax that has been working for a couple of months now.

Quite well.

Um, and you're also looking, you mentioned the medals, so tell us what you're thinking there and kind of what the best way is to play those.

Oh, well, I mean, when, when you talk about precious metals like gold now, gold versus Bitcoin, I know that Bitcoin is not a metal but it's kind of a metal.

I mean, maybe the to the people who are really involved in it, it's not, but to an old guy like me, Bitcoin is gold as far as I see it and probably uh they're almost the same kind of thing from my generation.

The alternative investment was gold is gold.

So I see gold as the way to play that because gold is less volatile.

So I don't have to face the same risk as a younger person, but a younger person might be attracted to cryptocurrencies, especially Bitcoin because they, while they face higher volatility, they probably face greater returns over the long run.

So II, I do see them as almost identical parallel trades, but probably separated by how close you are to retirement is whether you should be in gold or Bitcoin.

And what about copper?

You know, we've been talking so much about copper being at highs.

Um We had an interesting debate on the show earlier today or I should say on market domination earlier today because we're now a different Joe.

Um uh about, you know, how much of what's happening with copper is being filled by the short squeeze versus the fundamentals.

Yeah.

Iii I watched that show actually and I, and I, I heard your guest who, who sees a, I guess less potential for copper than I do going forward.

She sees this price, these prices are exuberant.

She's right about that.

But I see copper as part of my electricity trade and it's, it's part of uh not, not only infrastructure which we do believe that China which is starting to come out of, it has come out of recession.

Uh China probably we will have some kind of infrastructure package because that's what they do when they've been in trouble.

They boost the economy through infrastructure here in the US.

We have almost no choice but to spend fiscally.

So II I do see copper probably, I don't know if this pace of growth we can see but it, it remains part of the inflation trade.

Um and you know, is silver just kind of going along with gold here.

Yeah, silver, you know, silver is a sort of a precious metal sort of an industrial metal.

Uh it's been red hot, thank goodness.

I love it.

I've been in it for too long to make it worthwhile.

It's finally becoming worthwhile and I do like silver.

It's still catching up, I think.

And I think because it's useful both as a store of value and industrially, I think it, it probably captures some of the growth that you might not see with gold or you might not see with copper, but it kind of plays the middle.

So I, I do.

Me, at least I need to be in all three as well as uranium.

Lots of ideas here.

Sarge.

Thanks so much.

Appreciate it.