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The potential market impact from the U.S.’ exit from Afghanistan

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Stephen Guilfoyle, President of Sarge986 LLC, joins Yahoo Finance to discuss potential economic and market impact on U.S. troops evacuation from Afghanistan, outlook on semiconductor space, and Fed tapering expectations.

Video Transcript

ALEXIS CHRISTOFOROUS: Let's get back to the markets now, bring in Stephen Guilfoyle. He is president of Sarge986 LLC, and a former member of our military. Sarge, always good to see you. Before we get to the markets, I just want to-- you weren't expecting this question, but I just wanted to ask your take on what you see happening in Afghanistan right now, and President Biden looks like he's going to stick to that deadline of getting all of our troops withdrawn from the area by August 31.

STEPHEN GUILFOYLE: Well, I think the withdrawal has been very sloppy. To tell you the truth, if I'm the commander in chief and somebody tells me to get out by August 31, I'm staying till December 31. That's how I feel about it. And I have no problem going in getting Americans or allies who need our help. I have strong feelings about this, and if you let me go on a rant, it would be terrible for your ratings.

ALEXIS CHRISTOFOROUS: OK. Well, you can do that on Twitter. And people can certainly follow you and here you there. Do you think that what we're seeing play out in Afghanistan right now will have any economic impact? Is it going to affect what's happening in the markets? I mean, so far it doesn't look like it is. We've got the NASDAQ and S&P both at record highs today.

STEPHEN GUILFOYLE: Actually, certainly. I've reinitiated long positions in Raytheon, Lockheed. I've added to General Dynamics and Kratos and Palantir. Palantir-- all basically because I think that the way we are exiting Afghanistan makes us look weak to our allies and to those who might depend on us going forward. It leaves the football, so to speak, for the next president to have to rebuild our credibility.

And we're probably going to be dragged into something bigger and nastier because we are allowing ourselves to look like a paper tiger right now. So my feeling is that we are going to have to spend more on defense and probably have to stick up for somebody maybe when we don't really want to down the road because we didn't stick up for somebody here.

ALEXIS CHRISTOFOROUS: All right. So defense stocks, you're doubling down on those and you make your case as to why. What are some other sectors? I know the last time we talked, you were big on the semiconductor stocks, particularly, was it AMD or Nvidia? Remind me.

STEPHEN GUILFOYLE: It was both of them. And they're both performing, Nvidia especially. The news out of China yesterday actually which was a boon for semiconductor investors that they were going to let the ADI deal with Maxim go through. That looks good from Nvidia trying to take over Arm Holdings. It looks good for AMD in their run at Xilinx.

So we're getting- and also there was that news with Intel yesterday. They're going to get a defense contract. So it's really right now we're compressing a great wave of here with semiconductors. I also-- I might want to tell you-- I actually got out of CrowdStrike and Palo Alto this morning on this path. And they were two of Jared's trenders there. So I thought that was kind of funny.

ALEXIS CHRISTOFOROUS: That is good. Why did you get out when you did?

STEPHEN GUILFOYLE: You know what, I'm sitting on so much profit in those names and in Zscaler as well. I normally try to stay along these cybersecurity names. I normally get out of names incrementally, not in one shot. But I mean, I thought with so much risk potentially looking forward into September, I wanted to get out now. If there is some kind of contraction in the markets over the rest of the week, I fully intend to get back into Zscaler and CrowdStrike ahead of earnings. CrowdStrike's next week, I think Zscaler is still about a month away. Because I like all these names, and I don't want to be invested in cybersecurity, but you know, when you were a trader and you have profits, you have to back them.

ALEXIS CHRISTOFOROUS: Right, so no regrets. No regrets there for letting them go this morning?

STEPHEN GUILFOYLE: No. Not all right.

ALEXIS CHRISTOFOROUS: All right. I want to talk about the Fed and this Jackson Hole symposium that kicks off on Thursday. We're going to hear from Fed Chair Powell on Friday. What are your expectations for this? A lot of people are hoping we're going to get a little clarity on when the Fed is going to start pulling back that bond purchasing on a monthly basis. Do you think we're going to get it?

STEPHEN GUILFOYLE: I think the market is pricing in December right now. So he's going to pass the football for September. I don't think anything's going to happen. There's only downside risk to the marketplace if he does seem a little aggressive. So I think he's going to push it out the December. Don't forget, the Treasury is going to borrow less moving forward. So this actually plays well is you're keeping interest rates low if the Fed does move ahead and taper into that environment as long as the legislature passes the $1 trillion or so infrastructure bill, which is priced into the market, but does not pass the $3.5 trillion spending plan, which is not priced into the market.

ALEXIS CHRISTOFOROUS: All right, Stephen Guilfoyle, a.k.a. Sarge, always good to see you. Glad to see you're doing well.