The Issachar Fund (LIONX) is 95% invested as of Thursday, June 14, 2018. ETF themes LIONX owns are: Small-Cap (45%), Mid-Cap (15%), Technology (15%), Health Care (10%) and the US Dollar (10%). I increased the LIONX Small-Cap weighting after receiving more conviction from a stronger dollar and advancing prices in that space. The S&P 500 Index appears to be in a short-term uptrend bumping against some over-head resistance that may be penetrated because the Russell 2000 (small-caps) Index broke through its trading-range resistance last month. I believe it is good sign to see the Small-Caps and Technology leading the market but now might be the time for the Big-Caps to play catch up. I feel the market is fundamentally and technically strong and I am playing it one day at a time.
The Fed Raises Rates:
The Fed decided to raise the Fed Funds Rate as planned by 1/4% (1.75% to 2% target range) and the expectations are to do the same at their next two meetings before year-end and three more hikes in 2019. They expect core inflation to reach 2% by year-end and they now see economic growth hitting 2.8% for the full year. They expect to see unemployment at 3.6% (currently 3.8%) by year-end. With all the rate hikes already executed and planned in the future, the market has still been plodding higher. Sooner or later, higher rates may be a concern but for now the market is trending higher.
ECB to End QE:
The ECB reported that it plans to taper its Quantitative Easing (QE) in October to $15 Billion Euro/month from $30 Billion and it expects to Stop buying European Bonds (QE) after December. They also anticipate keeping their balance sheet unchanged after QE. This surprise announcement sent the Euro falling against the Dollar which means the dollar suddenly became the favored currency. A stronger dollar has historically benefited smaller US companies more favorably over the larger capitalization companies. LIONX has sizable weightings in the Small-Cap and Dollar space. The Trump Tax and Regulation Cuts should also support a stronger US Dollar. If I were a large institution looking for return on capital, I would certainly consider investing in a US Treasury Bond yielding around 3% instead of a European Bond yielding less than 1%. I believe that big smart-money could find a happier home here in the US verses Europe simply because of the current risk/reward dynamics. I believe Trump is Making America Great and the US Stock Market seems to agree as it trades near all-time highs! Are you All-In, out or on the fence?
I am more optimistic than I was last week due to favorable chart patterns I am seeing and strong volume confirming my convictions. The band is still playing at the “stock market party” and everyone is still drinking the “cool-aid. The market may be due for some profit taking in the short run, but the trend is still your friend.
(Portfolio holdings are subject to change at any time and should not be considered investment advice. There is no guarantee that any investment will achieve its objectives, generate positive returns or avoid losses.)