Bear Market Rally! The Issachar Fund is in Cash, 100%! Natural gas dropped below our sell stop, and junk bonds rallied past our short stop, so both positions were sold. I want to be in the game (offense) when the market rewards us for taking risk and on the sidelines (defense) when the perceived risk is high. We can’t control what the market gives and takes, but we can attempt to manage the risk we expose our money to. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)
The NASDAQ (stocks listed on the NASDAQ electronic exchange) is down about -23% YTD and up about 13% since the June 19th bottom. I believe the 4% NASDAQ gain last week was an oversold below average, low-volume rally into the 50-day line within the context of a down-trending bear market. However, the 4% S&P 500 (big-caps) and Russell 2000 (small-caps) index gains broke above their 50-day lines, which is encouraging. Junk bonds are in a downtrend (-10% YTD) and trading below their 50-day lines, which indicates investor’s appetite for risk is low. The Fed is in a rate-raising balance sheet unwinding mode to slay the inflation dragon, so it will be difficult for the market to rise above this bear market until fundamentals change. A change of leadership come November could turn things around, so I will watch for more signs of hope. Let’s pray for God to send His people to power and put us back on the right track.
The Fed decreased its balance sheet by $4 billion last week. $4 billion is not a lot, but the Fed’s balance sheet has been in a steady downtrend losing over $143 billion since May. That fundamental trajectory will not likely change in the near term unless a black-swan event causes the Fed to crank up the printing presses once again. The market is digesting this new phenomenon of declining Fed liquidity, and it may take a while before a new source of liquidity replaces the Fed since 2008. I believe the Fed’s fight to reduce inflation will result in a stock and bond market grind lower or sideways at best. However, I reserve the right to change my opinion tomorrow if the weight of the evidence changes.
Tidbits: The European Central Bank raised rates 75bps Thursday after ten years of 0 to negative rates, and the dollar declined. A favorable CPI report this week may not signal the Fed is almost done raising rates. The average mortgage rate in the US hit 5.9%, its highest level since 2008. Houses are selling below asking on average, the first since 2020. Housing prices are down less than 5% from their peak. Housing starts in July, down 19%. Housing inventory is at its highest since 2020. Existing home sales were down 26% in 6 months. The average mortgage payment has been up 40% since last year. These housing trends could be an omen.
Bottom Line: Issachar is in Cash waiting for the next opportunity. Sometimes the hardest and best thing to do is sit on your hands. Winning by losing less is still losing, and that is not fun. We are on defense because this is a bear market, and we were not being rewarded for risking our capital. Sometimes, it is easy to make money, and this is not one of them, so we will watch from the sidelines until it is time to go back on offense. Grace and Peace to everyone!
May God our Father and the Lord Jesus Christ give you grace and peace. Romans 1:7
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: 4045-NLD-09/12/2022.