The Issachar Fund is fully invested in Muni Bonds with a small allocation to Preferreds. My conviction level in munis remains high with a moderate level of conviction in Preferred Stock ETFs. Preferred stocks entitle the shareholder to a fixed dividend, whose payment takes priority over that of common-stock dividends. Preferred stocks have a historical tendency to do well when bonds and stocks trend higher. If the preferreds perform as expected, I plan to increase our exposure. If things do not go as planned, I will not hesitate to do what is necessary to minimize our losses. Munis and preferreds have, what I feel are, good historical day-to-day serial price correlations and they seem to be working well at this time. (Portfolio holdings are subject to change at any time and should not be considered investment advice.)
The market appears to be in a holding pattern, likely in anticipation of this Wednesday’s Fed policy announcement. Fed CME Futures expect the Federal Reserve to reduce rates 3 times over the next 5 meetings, but they are expecting the Fed to keep rates steady after their 2-day meeting this Wednesday. There are some expectations of a possible rate cut, and it is not clear what the market will do in response. It could be seen as an admission that the economy is weakening. If the economy is weakening, then I would expect further rate cuts because I believe the Fed wants to see Trump reelected. Any hint of a possible recession would not be favorable for Trump in 2020 and I believe the Fed is well aware of that. Trump was not very pleased with his newly appointed Fed Chair, Jay Powell, when he raised rates in December and the market took a nosedive into Christmas Eve. Powell all but admitted he made a mistake by raising rates too soon and indicated that he would not be raising rates as expected. The market welcomed the dovish stance (lower rates) and formed a V-bottom rally into the end of April 2019. It sure seems to me that the market is addicted to lower rates and any hint that rates will not be declining may not be a welcomed event. I plan to keep my ears to the ground and my eyes on the road ahead because things could get ugly fast if the notion of higher rates were to creep back into the market. Yesterday’s return is behind us and tomorrow’s return is all that counts so let’s stay alert and never ever fall asleep at the wheel.
The S&P 500 Index is trading just above its 50-day moving average while the NASDAQ Composite Index is sitting just below its 50-dma. The dollar continues to trend higher and does not seem to be affected by a potential lowering of rates. I would expect the dollar to trend lower with lower rates but the fact that the dollar is rising tells me that money is likely flowing into the US in search of a higher yielding bond. Since most of Europe and Japan have negative yielding government bonds, investors seem to be flocking to the US to buy our positively yielding bonds. I am betting that this trend will continue even though we may be the worst house in a bad neighborhood. Lookout below if we ever get to a negative yielding US government bond. I hope to never see it in my lifetime, but I do believe it will happen.
But I will bless the person who puts his trust in me. (Jeremiah 17:7)
Bottom line: I believe the market is stuck in a holding pattern until the Fed decision on Wednesday. Prudence calls for patience at this time. Keep your powder dry for the next opportunity and let the charts tell the story. Good risk management seeks to avoid life-changing loses.
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, which can be obtained by calling 1-866-787-8355 or visiting https://www.LIONX.net. 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, Inc is not affiliated with Northern Lights Distributors, LLC.
Important Risk Information
Mutual Funds involve risks including the possible loss of principal.
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. Municipal securities backed by current or anticipated revenues from a specific project or specific assets can be negatively affected by the inability to collect revenue, for the project or from the assets. Moreover, an adverse interpretation of the tax status of municipal securities may make such securities decline in value. 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 to be incorrect and may not produce the desired results. Past performance is no guarantee of future results. S&P 500 Index is an unmanaged composite of 500 large capitalization companies. This index is widely used by professional investors as a performance benchmark for large- cap stocks. NASDAQ Composite Index is an electronic traded listing of over 5,000 active large and small companies. 3441-NLD-6/17/2019