Dollar Down, Gold Up! The Issachar Fund is about 13% invested in a Gold ETF (10%) and the remainder in three growth stocks! The dollar has been in a weak downtrend as the market seems to be anticipating a recession. The probability of a Fed rate hike at the May meeting looks to have slumped to about 12%. It should be hard for the Fed to continue its inflation-fighting rate increases if the inverted yield curve economy declines. When the dollar declines, gold tends to rise as it takes more dollars to purchase the same amount. Gold has been trending higher on above-average volume, near the $2,000 price of resistance. Gold may be rising because many investors believe the Fed will continue printing devalued dollars, and gold could be restoring its safe-haven status or inflation hedge. I want to increase my strongest conviction gold trade to 25% if the price of gold continues to reward us. I also like how selected growth stocks have come under accumulation in the last two weeks of money printing. I plan to increase exposure if we are rewarded for taking risk. The news cycle looks bad, but we should never “fight the Fed.” If the Fed creates more dollars “out of thin air,” they will find a new home, which is what I am focused on today. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)
The Fed increased its balance sheet by another $95 billion last week on top of $300 billion the prior week! The Fed just reversed 2/3 of Quantitative Tightening (QT)! The Fed decreased its balance sheet by $623 billion from 4/13/22 to 3/13/23 and then increased it by $391 billion since 3/13/23. Does the Fed know something they are scared to tell us which might explain their panic liquidity injections? While no one knows where stocks are headed, the price and volume charts indicate where this “new money” flows. The Fed raised rates by 25bps as expected but substantially decreased its balance sheet. Many seem to focus on what the Fed says about fighting inflation, but the Fed seems more concerned about saving its banks. After all, the Fed works for the banks, so I watch what Powel does instead of what he says. As the Fed prints money we do not have, that money must go somewhere, and some of this newly created “free money” is finding its way into gold and selected growth stocks.
Bottom Line: We are lightly invested in gold and growth stocks that appear to be under accumulation. While the “news” is bad, some areas of accumulation seem to be soaking up a lot of excess liquidity the Fed has been creating. The banks may still be in trouble because it is hard for banks to profit with an inverted yield curve. Brokerage stocks have declined as duration risk losses have also hit their bottom line. I believe the Fed will keep printing to prevent another “run on the banks,” and selected market areas could do well. I am following the charts and, most of all, my discipline. Grace and Peace to you and your loved ones!
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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: 5286-NLD-03/27/2023.