Market Update: 03-04-19

The Fund is about 90% invested in ETFs and Stocks.  There is about 60% in short-term bond ETFs and about 30% in individual stocks.  I like the Cloud, Healthcare, China and Technology space more than I like bonds at this time.  I am seeing a lot of institutional demand in the Software stocks as companies get out of Local Network Security and into Internet (Cloud) Security.  This is a huge Theme that appears to be spreading fast as companies try to “secure” their data.  Data Security and a transition to 5G Technology is occurring faster that we might imagine, and the companies involved in this “wave” of new innovation have my attention.  I am studying lots of charts and fundamental data seeking to add new positions mainly in the Cloud Security and Software areas. The good news is, there are a lot of fundamentally strong stocks in these areas breaking out of sound technical patterns.  The bad news is, the market is extended and due for a pull-back.

The market trend is still up! I believe this V-shaped recovery is driven by a “dovish” Fed and FOMO (Fear of Missing Out).  The Fed uttered some “hawkish” (higher rates) comments in Q4 and the market proceeded to discount the worse and the market fell over 19% from high to low.  The Fed did an “about-face” and released a “dovish” (lower rates) tone and the market bottomed on 12/24/18 and has since rallied over 19%.  A lot of investors exited the market during that steep decline and now many are coming back in due to a fear of missing out (FOMO).  I would not be surprised to see a quick re-test of the all-time high which is less than 5% away.  This would be typical for a V-shaped recovery as investors rush to get back in.  I can easily see the market digest gains by moving sideways for a bit and I believe that would be very constructive action.  The NASDAQ is up ten weeks in a row, so odds favor a down week is in the cards.

This week will mark the 10th anniversary of the market bottom when the S&P 500 Index bottomed out at “666”.  In Biblical terms, “666” is the “Mark of the Beast” (devil).  Yes, it may have been a devilish scary bottom, but the Fed rescued the market with Quantitative Easing (QE) and lower rates that the market now appears “hooked” on.  I believe that we are still under some form of QE and when the Fed does take his foot off the QE pedal, we will likely have “hell” to pay.  However, we do not appear to be there yet so let’s just enjoy the ride while it lasts.

We are near the end of earning season.  I prefer to not play “earnings roulette” with a stock unless I have a significant profit cushion in the stock.  I typically sell a stock before an earnings announcement because I have seen too many earnings “blow-ups” to ride through an earnings report.  I believe the reaction to earnings are often more important than the earnings itself.  I believe the reaction tends to express what the market was expecting. If the earnings were great and stock prices fall, the expectation was likely for higher earnings. If the earnings were bad but we see rising prices, the expectation was likely lower than expected.  Stocks “gapping” higher after earnings on strong above-average volume could indicate that “big money” wants in and they do not mind paying up.  I like to follow the “waves” that “big money” creates and ride them until they fade.  Currently, I am seeing a lot of “waves” that I want to ride but the “timing” has to be just right.  Patience is a Virtue.

$22 Trillion is a lot of US debt to pay off!  However, the US has about $300 Trillion in assets, and we have a $20 Trillion GDP.  Knock a few zeros of the numbers and a company with $300 Million in assets and a $20 Million Bank Loan (20 is only 7% of 300) may not look that bad. Our Debt/GDP is about 1.2 currently and our Debt cost is about 1.5% of GDP.  This cost is lower than the 3% we had in the 80’s.  I believe the US is in good shape and Trump is trying hard cut a favorable deal for America with China that will make things ever better for America.

Bottom line: The trend still appears to be up, and I am looking to get more invested in leading stocks under accumulation.  If you like what you are reading, please join me as a shareholder and I promise to manage your money like it were my own.  I wish you well!         

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Important Risk Information

Mutual Funds involve risks including the possible loss of principal.

The Fund may hold cash positions when 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 to be incorrect and may not produce the desired results.

Quantitative Tightening (QT) is a contractionary monetary policy applied by a central bank to decrease amount of liquidity within the economy.

Quantitative Easing (QE) is an expansionary policy aimed at increasing the money supply in order to stimulate the economy.

Investments cannot be made in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Past performance is no guarantee of future results.

NLD Review Code: 3186-NLD-3/4/2019