The Issachar Fund is in Cash, 100%! Last week was an expectation breaker because I expected the indexes to rally above their 50-DMAs like many dips before. Buying the dips had been working all year, but the tide may be changing. Low rates caused the tide to lift many boats, but it appears the tide may be going out, which could mean trouble for stocks and bonds. Interest rates have been rising probably due to higher inflation expectations, and the market has been selling off on higher above-average volume. When prices decline on big volume, that tells me that big money is concerned, so I try to follow the smart money. The big smart institutional money managers have been liquidating many of the favored stock market leaders. This massive liquidation tells me it could be different this time, so cash may be a good place to sit while the market decides where we are headed. My gut tells me this is just a correction, but I follow price, and I see caution flags. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)
The Fed decreased its balance sheet last week by $41 billion! Jay Powell said inflation was “transitory,” but now he says inflation could be here for a while. That is big news! If the Fed is concerned inflation may be heating up to a level they were not expecting, they may slow their balance sheet expansion experiment, which could be bad news for the stock and bond market. I believe the market has been rising because the Fed is printing massive amounts of “free money,” Most of this liquidity has found its way in the stock market. If the liquidity spigot is turned down more than the market expected, we could be in for a severe correction/bear market. My perception of risk is high. Therefore, I prefer to sit in cash while the market works through this challenging period.
Bottom Line: Sell signals were triggered last week as risk increased, so cash is where we are now. If the Fed is concerned about inflation, then I am worried because they control liquidity. If liquidity is contracting, then the market and the economy could be in trouble. I have peace while patiently waiting for the next opportunity.
The Issachar Fund is 100% committed to Biblically Responsible Investing (BRI) stocks.
Links: Fact Sheet Performance Blogs Strategy My Story Docs BRI/ESG
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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 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: 5547-NLD-10042021.