The Fund is 83% invested (80% bonds, 17% Cash and 3% equity). As my stock positions hit sell signals last week, I placed the proceeds in short-term bond ETFs and Cash since I could not find low-risk entry points in high quality leaders. This is similar to what I was seeing in the 4th quarter of 2018 which then led the market into a 19% decline that bottomed on Christmas Eve. I am not saying we are headed lower from here, just that we made need time to let the market reveal its next move. My opinions, convictions and predictions are not always right so I rely on the charts to tell me what the market is doing, and I seek to act accordingly. If my watch list of stocks develops opportunities for entry, then I plan to buy them and then follow my sell disciplines. I believe buying right is my first line of defense and a major component of sound risk management. The trend is still up and maybe we just need a little more time and patience to consolidate the recent gains. I feel this six-day consolidation has been orderly, healthy, and necessary and many leading growth stocks are building second-stage bases that will hopefully lead to higher prices. Patience takes patience.
Two Friday’s ago, the yield curve inverted and sent a shocking message through the markets that a recession could be on the way. I do not know if I see a recession in the near future, but the banking index was maybe trying to warn us of a slow-down because it was already in a steep decline before the curve inverted. Banks are sensitive to the economic growth because they borrow money on the short end of the curve and lend towards the longer end of the yield curve. If the yield curve inverts (shorter maturity rates are higher than longer rates) banks tend to make fewer loans and therefore less profit. Banks can borrow money from the Fed at the lower Fed Funds rate and buy longer dated treasuries as a way to maintain profitability. However, the Fed tends to frown on such actions as it does not encourage economic growth which banks should be doing.
President Trump nominated Stephen Moore as a Fed Board Member. Trump has criticized Fed Chair Powell for raising rates in December when the market seemed to be struggling higher. It now appears that Trump was right, and Powell was wrong because the Gross Domestic Product (GDP) expanded at a 2.2% annual pace in the fourth quarter. The expected GDP growth was 2.6% so raising rates in Q4 did not help the economy expand and likely caused it to contract. Stephen Moore has indicated that he would like to declare an emergency Fed rate cut of ½ point! Now I see why Trump wants him on the Fed Board. I believe that President Trump wants a roaring economy and stock market into his 2020 reelection because it may help him maintain his Presidency and possibly allow Republicans to win back the House. I also believe this would be a huge win for most of America.
Many leading stocks are forming basing patterns as they consolidate gains. I believe the best stocks consolidate over time, not price. The market and weak stocks fall while strong stocks go sideways. Stock fundamentals show us what everyone already sees. Everyone can see the numbers and determine if a company is growing or not. I like stocks with strong fundamentals (especially recent quarterly earnings and sales), but I pay more attention to the chart patterns. Chart patterns are an expression of the buy and sell behavior of market participants and charts give me an impression of the demand for a stock. I like to buy stocks under accumulation and sell them before they go under distribution.
Bottom line: Managing a mutual fund is not always easy. However, I have been managing money for 29-years and the market is always teaching me how to become a better manager. I have learned to always remain open-minded and be willing to change my mind if price requires me to do so. Lesson: buy right and never chase stocks higher. I believe the market is going through some healthy digestion and we are setting up for the next up-move. Patience is one of the Fruits of the Spirit and I am patiently waiting for our next opportunity.
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 visiting https://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, Inc is not affiliated with Northern Lights Distributors, LLC.
Important Risk Information
Mutual Funds involve risks including the possible loss of principal.
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 to be incorrect and may not produce the desired results.
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: 3229-NLD-4/1/0219