Market Update: 08-01-22

The Issachar Fund is sitting patiently in Cash, waiting for lower-risk opportunities. The S&P 500 index dropped nearly -12% from 6/7/22 to 6/16/22 (7 days), then rallied about 12% (29 days) into the 4,177-congestion area of resistance on Friday. The NASDAQ 100 rallied past tight double-top congestion areas on below-average volume, so I expect these major indexes to consolidate/decline from these overbought levels. If the market pushes through these resistance areas on above-average volume, I plan to buy fundamentally sound stocks near pivot points. The Fed raised rates 75 bps on Wednesday to combat inflation while congress is increasing spending by passing a $280 billion Chips Plus Bill. Congress is also scheduled to pass a $739 billion Inflation Reduction “green energy pork barrel” tax and spend bill to fight climate change. Over $1 trillion of new government spending will likely increase (not reduce) inflation the Fed is trying to tame. On Thursday, we learned that the 2nd quarter of U.S. GDP contracted by -0.90% following a -1.5% decline in the 1st quarter leading to a “technical” recession. Congress is rushing these bills through before their August recess because Democrat leadership could change after the November elections. There is hope that Democratic Senator Kyrsten Sinema could kill the “climate change” bill and save America. Congress raising taxes and regulations in a recession and increasing spending while inflation is still hot defies common sense. Recession + Inflation = Stagflation. We could be mired in a stagflationary environment of low growth and high inflation until we get new leadership with an America-first vision. Unfortunately, I believe evil forces want to destroy America, but God still has His hand of favor and protection on America, and we win in the end. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)

The Fed decreased its balance sheet by only $9 billion last week to $8.9 trillion, but still near its $9 trillion all-time high. The Fed is trying to fight inflation by raising rates which increases the cost of money, but they are not aggressively selling bonds (QT) to reduce their balance sheet as promised. The inflation-fighting Fed has reduced its $9 trillion balance sheet by only $55 billion since May 25, 2022, so selling more of its government bonds will likely cause rates to rise even more in a recession. The market seemed relieved the Fed only raised rates 75 bps instead of 1%, which may indicate that they will only raise rates by 50bps at their next meeting on September 21st. The market may also be anticipating the Fed may switch from Quantitative Tightening (QT) to Quantitative Easing (QE) sooner than expected.  

Bottom Line: Issachar is still on the sidelines, eager to take advantage of the next lower-risk buying opportunity. If a new bull market has started, the market needs to decisively break above its longer-term downtrend line of resistance on greater volume. Increased government spending will likely increase inflation, and higher taxes and regulations will likely cause slower growth in a recession. I do not like what congress is doing, but the market knows best, so I follow price and volume charts for direction clues. Junk bonds are also trading up against a declining trend line of resistance and this week should be a big “tell” in the market. My stock watch list is growing, but they are not your typical new bull market leaders of retail and growth names, so I remain skeptical that the bottom is in. More deficit spending, Fed money creation, and not robust sales/earnings seem to be the driver behind this overbought bear market rally, so I will wait for more evidence before joining the free money printing party. Early bargain hunters will likely have a painful experience until we get some degree of capitulation selling. I pray that China does not shoot down Pelosi’s plane if she flies to Taiwan. I pray for God to raise leaders who honor the One who created everything. We build houses, but God created the wood.    

Links: Fact Sheet, Performance, Blogs, Strategy, My Story, Docs, BRI

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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 an investment decision. Opinions expressed are subject to change, not guaranteed, and should not be considered investment advice. There is no assurance these opinions or forecasts will come to pass, and past performance is no assurance of future results. For more information regarding the fund, including current performance, please visit IssacharFund.com.   Review Code: 5716-NLD-08/01/2022

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Dexter Lyons