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Market Update: 02-21-23

By / February 21, 2023

Recession & Higher Rates!   The Issachar Fund is about 70% invested in 31 growth stocks and looking to sell more if the market continues to de-risk! Thursday’s hot PPI number damaged the disinflation theme that had taken root after Powell’s dovish comments following the last Fed meeting. Those comments launched a FOMO stock market rally as rates and the dollar advanced into double-top resistance. The dollar may be rallying because it expects US rates to rise as global assets flock to higher yields. Junk bonds have rolled below their 50-DMA, indicating risk may be increasing. Junk bonds rally when investors feel comfortable taking on more risk for higher yields. Investors’ risk appetite is waning, and junk bonds are retreating. Home-building stocks were doing well in anticipation the Fed would raise rates only two more times, but they have come under heavy selling pressure, so we sold out of those positions. CME Fed Futures say the Fed will raise rates three more times in 2023, causing lots of institutional distribution in the stock market. I expect the market to consolidate recent gains and not retest the 1/19/23 lows, but I will let the charts dictate my actions. I remain flexible and make incremental risk management decisions based on what I see in the market. The market decides the return, so we must manage risk to achieve our long-term goals. Risk is elevated, and caution is warranted. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)

The Fed decreased its balance sheet by $51 billion last week! When the Fed reduces its balance sheet, it sells bonds causing yields to rise, which drains liquidity. Less liquidity is less money to buy stocks and bonds; therefore, prices tend to fall when buyers don’t show up to bid up prices. Liquidity is the blood that flows through the market veins. Less blood could lead to a sick patient, so let’s hope the Fed does not kill the economy by raising rates and unwinding its balance sheet too fast.

Bottom Line: Issachar is dancing close to the door in case we hear “last call.” No one rings a bell to say it is time to sell, but there may be a “dog whistle” if one is trained to hear. The S&P 500 Index lost over -18% last year, and there is no guarantee that it will not fail again this year. I am a risk manager, and my perception of risk has increased, so I am more willing to sell than buy. However, the market decides the return, so I will get more invested if I see signs of institutional accumulation coming back in the markets. The CPI, PPI, and retail sales came in hotter than expected, raising fear the Fed would raise rates higher and for longer than Wall Street had hoped and anticipated. The odds of a 50-basis point hike at the next Fed meeting have increased significantly, along with the risk of recession. Thank you, and may God bless and prosper all new and existing Issachar shareholders. May God’s Grace & Peace continue to guide your decisions.  

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Issachar: A Buy & Hold Alternative Actively Managed Like A Hedge Fund!

God is able to bless you abundantly so that in all things at all times, having all that you need, you will abound in every good work. Corinthians 9:8

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: 5230-NLD-02/21/2023.

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Issachar Fund
c/o Gemini Fund Services, LLC
17605 Wright Street, Suite 2
Omaha, NE 68130
866‐787‐8355
337‐983‐0676

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Important Risk Information

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, which can be obtained by calling 1-866-787-8355 or going to the Documents page.  The prospectus should be read carefully before investing. The Issachar Fund is distributed by Northern Lights Distributors, LLC., member FINRA/SIPC

The Issachar Fund involves risks including the possible loss of principal, and may not be suitable for all investors.

The Fund may engage in frequent trading, leading to increased portfolio turnover, higher transaction costs, and the possibility of increased net capital gains, including net short-term capital gains that will be taxable to shareholders as ordinary income when distributed.  The Fund may hold cash positions and 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 Fund’s investments in large capitalization stocks may underperform Funds that invest primarily in the stocks of lower quality, smaller capitalization companies during periods when the stocks of such companies are in favor.  Investments in small-capitalization and mid-capitalization companies involve greater risks and volatility than investing in larger capitalization companies.  Small and medium-size companies often have narrower markets for their goods and/or services and more limited managerial and financial resources than larger, more established companies.

The Fund invests in debt instruments which have varying levels of sensitivity to changes in interest rates, credit risk and other factors.  Many debt instruments are subject to prepayment risk, which is the risk that the issuer of the security will repay principal prior to the maturity date.  The Fund could lose money if the issuer or guarantor of a debt security goes bankrupt or is unable or unwilling to make interest payments and/or repay principal.  Changes in an issuer’s financial strength or credit rating also may affect a security’s value and have an impact on Fund performance.  The value of the Fund’s investment in fixed income securities will fall when interest rates rise and the effect of increased interest rates is more pronounced for intermediate-term or longer-term fixed income obligations owned by the Fund.  The Fund will invest a significant portion of its assets in securities that are rated below investment grade or “junk bonds.”  Junk bonds may be sensitive to economic changes, political changes, or adverse developments specific to a company.  These securities generally involve greater risk of default or price changes than other types of fixed-income securities and the Fund’s performance may vary significantly as a result.  The floating rate loans in which the Fund invests are usually rated below investment grade and are generally considered speculative because they present a greater risk of loss, including default, than higher quality debt securities and may be less liquid than higher rated debt securities.

The value of the Fund’s asset-backed securities may be affected by changes in interest rates, the availability of information concerning the interests in and structure of the pools of purchase contracts, financing leases or sales agreements that are represented by these securities, the creditworthiness of the servicing agent for the pool, the originator of the loans or receivables, or the entities that provide any supporting letters of credit, surety bonds, or other credit enhancements.  The Fund’s investment in municipal securities carries additional risk including changes in federal, state or local laws that may make a municipal issuer unable to make interest payments when due. Municipal securities backed by current or anticipated revenues from a specific project or specific assets can be negatively affected by the inability to collect revenue, for the project or from the assets. Moreover, an adverse interpretation of the tax status of municipal securities may make such securities decline in value.  In addition to the risks typically associated with fixed income securities, loan participations carry other risks, including the risk of insolvency of the lending bank or other intermediary.  Loan participations may be unsecured or not fully collateralized, may be subject to restrictions on resale and sometimes trade infrequently on the secondary market.

The Fund uses investment techniques, including investments in futures contracts, forward contracts, options and swaps, which may be considered to be an aggressive investment technique.  Investments in such derivatives may general be subject to market risks that may cause their prices to fluctuate over time and may increase the volatility of the Fund.  The use of derivatives may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives, such as counterparty risk and the risk that the derivatives may become illiquid.  The use of derivatives may result in larger losses or smaller gains than investing in the underlying securities directly.   Interest rate swaps are subject to interest rate and credit risk.  Total return swaps are subject to counterparty risk, which relate to credit risk of the counterparty and liquidity risk of the swaps themselves.  There may be an imperfect correlation between the prices of options, futures, and/or forward contract and movements in the price of the securities (or indices) hedged or used for cover which may cause a given hedge not to achieve its objective.  There may not be a liquid secondary market for futures contracts and Forward currency transactions include the risks associated with fluctuations in currency.   If the Fund uses a hedging instrument at the wrong time or judges the market conditions incorrectly, the hedge might be unsuccessful, reduce the Fund’s investment return, or create a loss.  Use of leverage can magnify the effects of changes in the value of the Fund and makes them more volatile and increases the risk for loss in adverse environments.  Short positions are designed to profit from a decline in the price of particular securities, baskets of securities or indices.  The Fund will lose value if the instrument’s price rises – a result that is the opposite from traditional mutual funds.

Investments in foreign securities and securities that provide exposure to foreign securities involve greater risks than investing in domestic securities.  As a result, the Fund’s returns and NAVs may be affected to a large degree by fluctuations in currency exchange rates, political, diplomatic or economic conditions and regulatory requirements in other countries. The Fund also may invest in depositary receipts, including ADRs, which are traded on exchanges and provide an alternative to investing directly in foreign securities.  Investments in ADRs are subject to many of the risks associated with investing directly in foreign securities.  The laws and accounting, auditing, and financial reporting standards in foreign countries typically are not as strict as they are in the U.S., and there may be less public information available about foreign companies.  Investments in emerging markets instruments involve greater risks than investing in foreign instruments in general. Risks of investing in emerging market countries include political or social upheaval, nationalization of businesses, restrictions on foreign ownership and prohibitions on the repatriation of assets and risks from an economy’s dependence on revenues from particular commodities or industries among others.

No-Load mutual funds are sold without a sales charge, however other fees and expenses do apply to an investment in the Fund.

Total annual fund operating expenses are 1.86% for Class N and 1.74% for Class I. Total annual fund operating expenses after fee waiver and expense reimbursement are 1.90% for Class N and 1.65% for Class I. The Fund’s adviser has contractually agreed to waive management fees and make payments to limit Fund expenses until February 1, 2023 so that total annual operating expenses do not exceed 1.90% for Class N and 1.65% for Class.

NLD Review Code: 5119-NLD-3/16/2021

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