Druckenmiller Gave Us The Trade
Druckenmiller Interview
Ahead of the election and following the recent Fed rate cut, one of my all-time favorite investors, Stanley Druckenmiller, spoke with Bloomberg this week. While the questions naturally focused on those hot topics, if you listened closely, there were hidden clues in plain sight about one key opportunity in the market—regardless of who the next president will be.
Our Obsession with Change
We are obsessed with change. You see it as a focus of every political campaign…because it works. However, the focus on change is often misplaced. Things tend to stay the same more than they change. As a market technician, I view trends as anti-change: an object continuing to do what it’s already doing, hence forming a trend.
Amid discussions about potential changes under the next president, Druckenmiller also offered clarity on what will remain consistent, regardless of who wins: industrial spending. He noted, “They’re actually unified on some things, like industrial policy. Both of them apparently think the government should have a major role in allocating capital.” What Druckenmiller is referring to is the government’s allocation to infrastructure spending. While he may disagree with it, he’s smart enough to realize that government spending is a certainty. As I’ve said before, I don’t make the rules—I just try to understand them, so I can use them to my advantage.
He also mentioned that, despite selling his Nvidia ($NVDA) shares early (which, as we know, selling winners early can sting), there are “still many ways we’re playing AI, particularly the infrastructure that’s been built out to support the power that’s needed.” That’s the trade. He literally handed it to us, but if your attention was focused on his criticisms of both candidates or the Fed, you might have missed it. The real trade is in U.S. infrastructure.
The Charts Confirm Druckenmiller’s Take
While I can’t get enough of Druckenmiller’s insights, I make my investment decisions based on price. He can say all the right things, but the charts have to confirm the views—and in this case, they do exactly that.
$PAVE – the Global X U.S. Infrastructure Development ETF – invests in companies operating across construction and engineering, the production of infrastructure raw materials, composites, industrial transportation, and producers/distributors of heavy construction equipment. Collectively, these represent the infrastructure development sectors.
This ETF perfectly aligns with what Druckenmiller was talking about: an opportunity to invest in an area where the government will continue to spend coupled with AI continuing to serve as a tailwind for these sectors. Most importantly, this is an area of the market that’s in a strong uptrend that’s resolving higher.
The $PAVE ETF holds roughly 100 stocks, and upon digging through the list, there are many great setups. Even when you plot just the three largest holdings—$TT (Trane Technologies), $URI (United Rentals), and $ETN (Eaton), you’ll see they’re all up roughly 2x compared to $SPY(S&P 500) year-to-date.
I also highlighted six additional industrial plays in July that still look promising.
Zig When They Zag
Stanley Druckenmiller’s interview stands out. While many focus on political change (zig), his advice emphasizes the importance of understanding what will remain consistent (zag)—specifically, government spending on infrastructure. His focus on industrial policy and opportunities in AI-driven infrastructure development aligns perfectly with broader market trends. It’s a smart way to zig while everyone is focused on zagging.
Cheers,
-LT3
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Bonus Infrastructure/Industrial ETFs – $AIRR $IFRA