Cheryl Pate’s top ingredient for an ‘inflation-proof’ portfolio

The rapid surge in inflation is making it all the more important for investors to protect their portfolios against it, and Angel Oak Capital Advisors’ Cheryl Pate says “financials” is the way to do it.

Pate’s remarks on CNBC’s ‘The Exchange’

Pate is convinced that banks and consumer finance companies will outperform in an inflationary environment. On CNBC’s “The Exchange”, she said:

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Banks, in particular, consumer finance are all leveraged to outperform in an inflationary environment given steeper yield curve, re-acceleration, re-leveraging of the consumer, and still a benign credit environment.

On Wednesday, the Bureau of Labour Statistics said prices for U.S. consumers jumped 6.2% in October – the hottest reading since 1990, putting more pressure on the central bank to reconsider tightening.

Names Pate likes in particular within ‘financials’

A few names that pop out to Pate within “financials” include American Express, Capital One, Ally Financial, and Silicon Valley Bank. She’s confident these stocks will perform well as the U.S. Federal Reserve starts to raise rates but said “there’s more to the story”.

This is a great opportunity for card acquisition. We saw that in American Express earnings where they added the highest number of new card accounts in over three years. So, it’s a willingness to borrow again and spend again, which will drive higher volumes, higher loan growth, and then the rates are added into that in terms of margin.

During the same interview, Independent Advisor Alliance’s Chris Zacarrelli agreed it was time to take up positions that could protect the portfolio against the rising inflation. The Financial Select Sector SPDR Fund is up more than 30% this year.