The Fund holds 100% in short maturity cash equivalents. Cash is a position! I sold all stock positions last week as the market declined following a Trump Tweet promising to raise tariffs on Chinese imports by Friday if the Chinese did not give into his demands. The market lost about 2% last week. When the market is not rewarding me for taking risk, I prefer to reduce exposure or simply step aside and let the market do what it needs to do. Imagine doing a planned retreat to hilltop on a battlefield to get a better view of what you are up against. Once we clear our minds and get a vision of where we are headed, then we can plan our attack. In a sense, going to an all cash position allows me to clear my head and refocus on my objective. Once I am convinced the market may reward us for taking risk, I will carefully reenter the market. However, most of the previous stock leaders are not acting like leaders so I will patently wait for the leaders to show me they are ready to “act right”.
The S&P 500 Index futures are pointing to about a 2% decline on Monday morning. Tensions with Iran and potentially more Chinese tariffs seem to be spooking the market at this time. The market traded lower last week on a sell-the-rumor; buy-the-news bounce-off-support reversal-rally on Friday. We could see the Chinese retaliate; however, they import far less from us than we import from them so they would likely feel more pain in a trade war. If this uncertainty starts to weigh on a lukewarm U.S. economy, the Fed may step in and lower rates. At this time, the positive market turnaround on Friday looks like it will be challenged. There is certainly a lot of uncertainty in the market and the market does not appear to like it so cash may be a good place to be for now.
The Put/Call ratio spiked above 1.11 which is the highest level since the December lows (blood in the streets) which marked the bottom on Christmas Eve. The Put/Call ratio measures the number of Puts (bearish bets) versus the number of Calls (bullish bets) and it is viewed as a contrarian indicator. In other words, there are more people betting that the market will go down than up. What if they are right this time and the market does head lower? Time will tell. I am in cash because the market was not rewarding me for taking risk and therefore, I believe the market will head lower in short order. However, I remain humble and ready to admit when I am wrong and hopefully learn valuable lessons, so I do not repeat my mistakes.
It is estimated that three-fourths of the global economy as measured by GDP will experience a slowdown this year. Smartphone shipment volumes (a key metric) were down 6.6% YoY in 1Q19 according to International Data Corporation (IDC). Apple and Samsung recorded their sixth consecutive quarter of declines with the slowdown accelerating. Since microprocessor chips are at the heart of these devices, that may explain why the semiconductor sector has not been doing so well lately. If the semiconductors do not hold support and roll over, then I suspect the market may follow suit. Further trade war China retaliation will likely escalate so I am keeping a close eye on China and how they respond. Trump threatened to slap 25% tariffs on the remaining $325 billion of imports currently untaxed on top of the $200 billion that were tagged on Friday. If China responds by raising its weighted tariffs on $60 billion of U.S. goods to 15% from the current 7%, that could reduce U.S. GDP by 0.1 percentage point. I believe that it would be wise for China to give into our demands otherwise they may suffer more in the long run. I am glad that someone is finally standing up for what is right for America!
Bottom line: We may have seen the top in the market, and we may have to test a lower low which would put the market in a confirmed downtrend. Do you have an exit plan for your assets, and will you stick to it if your line-in-the-sand is crossed? The market does not have to go up because it always has. The only constant in the market is change. What would you do if your account declined 25% to 50% or more? Would you ride it out or would it cause a life-changing event? Plan for the worst but hope and pray for the best.
Plans fail for lack of counsel, but with many advisers they succeed. Proverbs 15:22
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.LIONX.net. 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. Past performance is no guarantee of future results.
S&P 500 Index is an unmanaged composite of 500 large capitalization companies. This index is widely used by professional investors as a performance benchmark for large-cap stocks. NLD Review Code: 3343-NLD-5/6/2019