Market Update: 06-21-21

Subject: Inflation Trade Dies!     Growth Trade Comes Alive!   

The Issachar Fund is lightly invested as stops were triggered and stocks were sold.  The Fed repeatedly told us that inflation (higher prices) was transitory (short-term), and I did not believe them initially, but now I do.  I saw gas, lumber, metals, and food prices spike and assumed it would continue because the Fed created massive amounts of new money that had to go somewhere.  The inflation trade of buying companies that would benefit from rising cyclical and commodity-related stocks may have been the place to be, but that trade may be dead.  The inflationary traded stocks of energy, gold, banks, retail, and building sectors now appear to be under heavy distribution.  (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)

The Fed printed over $111 billion last week to an all-time high!  Some of that new money is finding its way into last year’s winners.  I am now seeing a rotation out of the inflation trade into the higher P/E growth stocks, and that is encouraging.  The S&P 500 Index (big-caps) is currently trading below its 50-day moving average, but the NASDAQ 100 is trading near an all-time high.  The junk bond index is trading above its 50-day moving average, indicating that investors still have an appetite for risk, bullish. 

The 10-year Treasury yield dropped over 4.5% on Friday to a yield of 1.45%!  Last week, the dollar spiked above 1.9% as investors converted overseas stock gains into dollars and bought Treasuries. As the dollar was rising, gold was declining due to their somewhat inverse relationship.  I believe the market is telling us that the Fed may not raise rates as planned.  There is a lot of foreign money earning zero to negative rates pouring into our positive yielding treasuries, causing the dollar to spike. I also believe we will see more cyclical stock selling this week, but some money will likely continue to rotate into the higher P/E growth names instead of a mass exodus into cash equivalents.  If the Fed were not stepping on the gas, I would expect the market to go into correction mode of a 20% decline in the indexes.  However, I believe the Fed will support (buy stocks and bonds) the market at all costs to prevent a stock market crash while we are in this COVID recovery period.  If I am wrong, I plan to sell the remaining small positions and wait for another buying opportunity.                

Bottom Line: The market may look ugly now, but I believe we could be witnessing the early stages of a rotation out of the famous 2021 inflation trade into the higher P/E growth stocks of last year.  If I am right, I plan to follow my discipline and buy fundamentally and technically sound stock charts that appear to be under accumulation.  As long as the Fed remains accommodative at the printing press, I will likely have a bullish bias believing they will try to backstop any potential crash in the stock market.  In my 31-years of professionally managing money, I have been here before, and by the Grace of God, I have always come out better and stronger, giving God the Glory.  I trust and believe that God’s Wisdom will take us to all-time highs and beyond.  Thanks for your Trust and Business!      

God is able to bless you abundantly, so that in all things at all times, having all that you need, you will abound in every good work.  2 Corinthians 9:8

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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.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: 5297-NLD-6/21/2021.

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Dexter Lyons