Market Update: 09-06-22

Powell Plummet Persists! The Issachar Fund is about 10% invested and very concerned! Junk bonds sliced through their 50-day moving average after Powell’s scary inflation talk two Fridays ago. The S&P 500 index rallied into its 50-day moving average on Friday and quickly reversed lower on heavy volume, a sign of distribution. I believe the market could be headed lower to test the June 16th bottom, which is about 8% lower. We were not rewarded for taking risk, so I sold down to my conviction level. I believe natural gas is in an uptrend supported by strong fundamental demand, so we have about 5% in a natural gas ETF. The “green new deal” plan to demonize fossil fuels will likely backfire and force us to rely more on natural gas to produce the electricity we need to survive. My other 5% conviction trade is an ETF that shorts junk bonds. Investors are losing their appetite for risk and have been selling their junk bond positions. I expect more selling as investors de-risk. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)  

Powell is fighting inflation by raising rates and decreasing its balance sheet. I see no reason to hold bonds that will go down in value while the Fed promises to raise rates until inflation is “under control.” Higher rates also make it more expensive and less profitable for companies to borrow money for expansion, especially when the economy is mired in a recession. A stagflationary environment of higher rates and slower growth is not conducive to increased earnings or P/E expansions. Therefore, I have decided to focus on the short side, expecting to make money if stocks decline. Shorting emerging markets has caught my attention, and I plan to act accordingly if things unfold as I expect.

The Fed DECREASED its balance sheet by $25 billion last week, which concerns me! I am concerned because the Fed is finally doing what it promised: to unwind its balance sheet fighting inflation. When the Fed reduces its balance sheet, they remove liquidity from the system, and the whole system thrives on liquidity. The Fed has reduced its balance sheet by $139 billion since 4/19/22, and the S&P 500 is down 11%. I do not see an easy way out of stagflation other than a prolonged recession/depression. The market has always bounced back to new highs, but this time may be different. Please support and pray for God-honoring men/women to get us out of this problem irresponsible leadership has caused.   

Tidbits: Natural gas prices soared 30% Monday after Russia said it would not reopen its gas pipeline to Germany until sanctions were lifted. Treasury yield curves are inverted! Banks paying higher interest rates on deposits and lending at lower rates is unsustainable. In each of the last 7 Bear markets, the S&P 500 did not bottom until AFTER the Fed began cutting rates, and I do not see the Fed doing that anytime soon. We need to cut the size of the Government, and the Fed must stop monetizing (printing money to buy debt) the Government spending; otherwise, it could end badly. 1/3 of U.S. homes sold in Q1 went to investors, not people intending to live in them. Goldman Sachs predicts U.K. inflation may hit 22%. Global recession?

Bottom Line: Issachar is lightly invested in natural gas and short junk bond ETFs. Liquidity is declining, and the market has responded negatively. I believe the market is headed lower to test the June 16th bottom. This high inflation and negative GDP growth (stagflation) environment will likely create life-changing losses for investors who do not manage/respect risk. I have been managing risk for over 32 years, and this is the worst D.C. leadership of incompetence I have ever seen. We need a change of God-honoring leaders to right the ship before it sinks. I expect to profit in this environment by making money on the short side (betting prices will fall). I pray for God’s Wisdom to be on our leaders. Grace and Peace to everyone!

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

Issachar: Active Alternative & Defensively Managed Like A Hedge Fund!

For the foolishness of God is wiser than men, and the weakness of God is stronger than men.
1 Corinthians 1:25

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, obtained by calling 1-866-787-8355 or visiting 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 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: 4026-NLD-09/06/2022.

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Dexter Lyons