Fed Pivot Rally! The Issachar Fund is 15% invested in growth stocks with great fundamental/technical chart patterns, plus a gold ETF! Every new year brings new investing themes where big institutions realign their portfolios, hoping to profit in the coming year. I see early signs of big money moving into the Energy, Medical, and Machinery Sectors as stock prices rise on above-average volumes. 2023 could be the year Gold shines, as it has been in an uptrend since bottoming last November on above-average volumes. Gold stocks do not yet have the accelerating earnings and sales fundamentals I am looking for, but that could happen if Gold continues to come under accumulation. Gold is my best conviction play, and Energy stocks are a close second as they continue to advance on strong volume. Gold may be a play on a weakening dollar as it may be losing some of its global reserve currency status. If the dollar continues to decline, the price of Gold traded in dollars could rise because it would take more dollars to buy the same amount. The dollar may also be in a downtrend betting the Fed will pivot and slow its rate increases designed to tame the inflation they created. Lower relative rates make the dollar less attractive among other global currencies with higher rates. Whatever the reasons behind the moves, growth stock prices are firming up, and volume is confirming the advance, so I have dipped my toe in the water, and the water is warm. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)
In last Friday’s jobs report, average hourly earnings rose less than expected, and the market responded with a Fed Pivot Rally! The market expects the Fed to raise rates by 25bps on February 1st instead of 50bps. This Thursday’s Core CPI report could confirm a Fed Pivot if CPI inflation does not come in too hot. The market usually knows what the Fed will do before they figure out what they were wrong about, so let’s keep our eyes on price and volume. Price is the only thing that pays. The market does not care about our feelings, opinions, theories, or our favorite indicator. The market expects the Fed to engineer an economic soft landing, and portfolio managers are selling former leaders and picking faster horses for a new race.
The Fed reduced its balance sheet by another $44 billion last week! They have drained over $458 billion from the system since peaking on 4/19/22. The decade-plus, infinite-money printing QE binge seems to be in full retreat as the Fed focuses on taming the inflation dragon.
Bottom Line: Issachar holds about 85% Cash, which could decline if the market rewards us for taking risk. I try to let the leaders pull me in (buy) when they are being accumulated and push me out (sell) when under distribution. The NASDAQ 100 and S&P 500 Indexes may have put in a tradeable bottom, and we should know more this week if this rally is sustainable. I am optimistically bullish and expect to buy more growth stocks and Gold if things go as planned. Yesterday’s track record is history; the only thing that matters is how one is positioned for the future. Holding on to multi-year winning stocks may not be good if a new bull market has begun. Most True Market Leaders (TML) fail to regain their TML status, so cutting losses short is key to avoiding life-changing losses. Manage risk because the market decides the return. I wish you the very best of returns in 2023. Grace & Peace to everyone! Dexter@IssacharFund.com
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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: 5037-NLD-01/09/2023.