Market Declines as Fed Tapers!
The Issachar Fund went to 100% Cash on Black Friday, one day after Thanksgiving, as risk raised its ugly head! The market controls/provides the return we receive, so when I am not rewarded for taking risk, I prefer to sit on the sidelines and wait for conditions to change. Issachar is not your typical mutual fund. Issachar has hedge fund abilities which allow it to be long, short, or anywhere in between. The media blames the recent market decline on the latest “scarient” called Omicron, but I believe the market is in a short-term downtrend due to the Fed action. The Fed told us that inflation was “transitory,” but now Jay Powell says that inflation may be with us for a while, so they may now try and tame the very inflation they created. Now that Biden announced he would reappoint Powell, rates may drift higher, causing losses for stock and bond investors. Suppose the Fed tries to unwind inflation too fast. In that case, they could throw the economy into a recession, and the bull market created from excess Fed liquidity could turn into a liquidity squeezed bear market. Junk bonds are trading below their 50-day moving average, indicating a higher-risk, lower-reward environment, so I plan to sit this one out. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)
The Fed decreased its balance sheet by $31 billion last week as the Fed started to taper! TheFed said they would “taper” their bond purchases, and they have begun. Remember the old saying, “don’t fight the Fed” well, I believe it has merit this time, so I plan to stay on defense until volatility/risk settles down. Margin debt was near extreme levels, and margin calls were being issued, which caused good companies to suddenly become bad stocks. The Santa Rally I was expecting into year-end may end up being a “bounce” off an oversold condition, so the potential reward is not worth the volatility risk, in my opinion. Let’s keep our powder dry so we can live to fight another day.
Bottom Line: Cash is a position, and that is where we are for now. The market is not rewarding risk. Therefore, I plan to stay on the sidelines until conditions change. The market is in a short-term downtrend defined by a series of lower lows, so I will continue to build my watch list of potential candidates. Now that Powell will be reappointed, his voice tone changed. Powell may now want to fight the very inflation he created instead of targeting unemployment. No baby likes his pacifier taken away, so we will soon see how the market reacts to a smaller Fed balance sheet. The Fed holds the liquidity key, and the market loves liquidity.
Do not be anxious about anything, but in every situation, by prayer and petition, with Thanksgiving, present your requests to God. And the peace of God, which transcends all understanding, will guard your hearts and your minds in Christ Jesus. Philippians 4:6-7
Links: Fact Sheet Performance Blogs Strategy My Story Docs BRI/ESG
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 www.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 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: 5721-NLD-12/6/2021.