Market Update: 07-29-19

The Issachar Fund (LIONX) is fully invested in Muni Bonds, Preferreds, Stocks, Small Cap Index (Short) and Gold.  Munis and Preferreds continue to perform well in this current environment of lower rates and I expect rates may keep declining in the near future.  I added 12 growth stocks to the portfolio and a small cap index short as a potential “hedge” against the entire portfolio.  Speaking of a “hedge”, gold has held up quite well in spite of a rising dollar, and I expect gold may move higher if the dollar declines from its current high.  The market expects the Fed to lower rates this week and if they don’t, I believe the stock and bond market could decline rapidly so the “hedge” is just in case the Fed acts unexpectedly.  However, I believe saner minds will prevail, and the Fed will do what is necessary to keep the economy on its steady pace of economic growth and the stock and bond market will hopefully continue to advance higher.  If I am wrong, I will do what I feel is necessary to keep shareholders in line with the objective of “seeking moderate capital appreciation consistent with capital preservation”.  (Portfolio holdings are subject to change at any time and should not be considered investment advice.)    

Q2 Gross Domestic Product (GDP) grew at a 2.1% annualized rate, after a 3.1% expansion in Q1, and well above the 1.8% expected GDP growth.  Germany, Switzerland, France and Japan all have negative yields meaning investors pay for holding government bonds.  In other words, investors pay a premium, for the privilege of owning sovereign debt.  Hard to imagine but it is true!  The European Central Bank (ECB) stated that it is ready to cut interest rates for the first time since 2016.  Mario Draghi, ECB President, sited that the European economic outlook is “getting worse and worse.”  Fifteen central banks have already cut rates and ten central banks are expected to cut again as global economies struggle to grow.  I do not see rates rising anytime soon. Germany’s manufacturing sector posted its worst performance in seven years and appears to be in an economic contraction.  Chinese GDP growth was reported to be the slowest in 27 years so how did Chinese stocks respond?  In this age of QE Infinity, Chinese shares rose on hopes for more stimulus measures from its central bank. Bad news can now sometimes be interpreted as good news because it assumes that government will keep printing “free” money as long as ……the “market” will allow.  This seems to be the “new normal” since QE began in 2008 as a way to “save” the market from its bad policies and irresponsible spending.  Sooner or later I believe there will be a price to pay for this excessive unaccountable QE acceleration experiment but I do not see that time is near.  Until then, let’s try to enjoy the ride and try to “make a little hay while the sun is still shining”.    

The major US stock market indexes are trading near all-time highs and I believe will likely continue higher if the Fed lowers rates this week.  Since a rate reduction seems to already be factored into the market, the market will likely be focused more on what the Fed says.  If the Fed indicates more rate reductions are likely to come, then I would expect gold and silver to rally and the dollar to decline as it loses relative purchasing power.  The dollar just traded past the January 2017 high and now sits at an all-time high.  One might think that a country with so much debt would surely NOT have a strong currency but yet, we do.  The dollar may be strong only because the other currencies are so weak.  The Euro has lost over 30% of its value since 2008 and the Yen has lost over 30% since it’s high in 2011.  In other words, the dollar may be the best house in a bad neighborhood.  All eyes are on the Fed, so let’s hope they give the market what it wants…. or else.

For it is by Grace you have been saved, through Faith—and this is not from yourselves, it is the Gift of God— not by works, so that no one can boast.  Ephesians 2:8-9

Bottom line:  If the Fed disappoints the market, we could be in for a major decline.  However, if the Fed acts as expected, the market should be happy.  I like how we are positioned.  However, if the market heads in the opposite direction I will do my best to prevent life-changing losses in your portfolio and mine.  Since no one can give you yesterday’s return, who will you trust for tomorrow’s return?

PS: I have now stopped drinking at the party, but I am still dancing.  However, I like to dance near the door in case the lights come on unexpectedly. 

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. 

If the Fund’s uses hedging instruments at the wrong time or judges market conditions incorrectly, the hedge might be unsuccessful, reduce the Fund’s investment return, or create a loss.  The use of leverage can magnify the effects of changes in value of the Fund and could cause investors in the Fund to lose more money in adverse environments.  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.    If the Fund’s uses hedging instruments at the wrong time or judges market conditions incorrectly, the hedge might be unsuccessful, reduce the Fund’s investment return, or create a loss.  The use of leverage can magnify the effects of changes in value of the Fund and could cause investors in the Fund to lose more money in adverse environments.    

NLD Review Code:  3556-NLD-7/29/0219

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Dexter Lyons