Market Update: 01-10-22

Bear Market Begins!    

The Issachar Fund is 100% in Cash! Higher P/E stock leaders of 2021 have been under heavy selling pressure as the “smart” money rotates into the lower P/E defensive names because the money must go somewhere. Every new year, big institutional money tries to align their portfolios with what they expect to happen in the economy. I believe they are repositioning for a higher inflation slower growth economy known as “stagflation.” The last stagflation period was in the 1970s, and the market appears to be on high alert to another difficult period for stock and bond investors. Prospectus binds some mutual funds to stay fully invested in aggressive growth stocks, and I believe they may have the biggest drawdowns/losses in 2022. The “go anywhere” funds like Issachar can adapt quickly to this rotation out of growth into value. I have my eyes on a few stocks waiting for proper entries. My watch list is chock full of value – higher dividend stocks which are very different from the “growthier” names we owned since the COVID low in March of 2020. I am a risk manager, and risk is rising, so Cash is a good position for now. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)      

The market had a “fearful” selloff on Friday after the weak jobs number thinking the Fed may be behind the curve to address inflation. The 10-Year Treasury yield is now trading near at its highest levels since the pandemic started in March 2020. The Fed has not “tapped the brakes” yet on “tapering” its bond purchases as its balance sheet is still near an all-time high of $8.7 trillion. The Fed created over $4.6 trillion since March of 2020, and a lot of that money ended up in the stock market. If the Fed reduces its balance sheet too fast, stocks could see even more heavy selling.

I believe we are now in a Bear Market! We could be near a phase where newer investors’ “weaker hands” capitulate as they realize that stocks don’t always go up. Stocks have done well over time, but there are periods where market losses will test every investor’s threshold of pain. The crypto and NFT market is getting crushed as many “believers” struggle with forced margin call selling. I believe the market changed after the Fed minutes were released. They are now more concerned about inflation and less concerned with employment since wages have risen. Rising wages typically lead to higher inflation, and the Fed normally fights inflation by raising rates. Rising rates usually do not bode well for growth stock investors or bondholders.       

Bottom Line: Issachar is in Cash while risk continues to rise. I believe the Fed created the inflation we are experiencing, and they will try to slowly “prick” the bubble they created. The market is concerned that we may be entering a stagflation period like the 1970s, which was not good for stock or bond investors. I am stalking lower P/E stocks for proper buy points, but I have no buys yet. I am also looking at stocks to short. A long/short strategy could be the perfect combination for 2022. Thank You for Your Continued Trust and Business, and I appreciate every one of you!  

May the God of hope fill you with all joy and peace in believing, so that by the power of the Holy Spirit you may abound in hope. Romans 15:13

Links: Fact Sheet Performance Blogs Strategy My Story Docs BRI/ESG

Investors should carefully consider the investment objectives, risks, charges, and expenses of the Issachar Fund. This and other important information about the Fund are contained in the Prospectus, obtained by calling 1-866-787-8355 or visiting www.IssacharFund.com. The Prospectus should be read carefully before investing. The Issachar Fund is distributed by Northern Lights Distributors, LLC., member FINRA/SIPC. Horizon Capital Management Inc. (HCM) is not affiliated with Northern Lights Distributors, LLC.

Important Risk Information: Mutual Funds involve risks, including the possible loss of principal. An investment in the Fund may not be appropriate for all investors. The Fund may hold cash positions when the Adviser feels that the market is not producing returns greater than the short-term cash investments in which the Fund may invest. There is a risk that the sections of the market in which the Fund invests will begin to rise or fall rapidly, and the Fund will not be able to sell stocks quickly enough to avoid losses or reinvest its cash positions into areas of the advancing market quickly enough to capture the initial returns of changing market conditions. The Adviser’s judgment about the attractiveness, value, and potential appreciation of particular asset classes and securities in which the Fund invests may prove incorrect and may not produce the desired results. Past performance is no guarantee of future results. Ratings are only one form of Fund performance and should not be used as the sole consideration in making an investment decision. Opinions expressed are subject to change and are not guaranteed and should not be considered investment advice. For more information regarding the fund, including current performance, please visit www.IssacharFund.com.   Review Code: 5038-NLD-1/10/22.

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Dexter Lyons