The Issachar Fund holds 165% in Muni Bond Mutual Funds (70%) and ETFs (95%). I purchased more municipal (muni) bond ETFs last week due to the accelerated price slope I am seeing in the muni space and the continued price deterioration exhibited in the stock market. We are using leverage because I feel the potential gain from a continued uptrend in muni bonds outweighs the cost of leverage. Muni bonds have historically produced good day-to-day serial price correlations and I find that very attractive in this market environment. Muni bonds are historically issued with lower interest rates when compared to government bonds because muni bond interest is tax-free on the federal and state level. Muni bonds are often considered a safe-haven low default-risk type of investment. Since muni bonds appear to be under accumulation, what is the market trying to tell us about the future of the stock market? (Portfolio holdings are subject to change at any time and should not be considered investment advice.)
The 10-year Treasury Bond Yield (2.21%) dipped below the targeted Fed Fund Rate (2.25%). I believe the market is trying to tell us that we are headed for a global economic slowdown. The market historically discounts the future by taking what is known today and forecasting what it sees in the future. Normally, the market does not like uncertainty and the ramifications of an escalated trade war may be too hard to predict so there seems to be a flight to the safety of government bonds. The market was worried about a China Trade Deal in December and now it is actually worse than it was near the Christmas Eve low. Perhaps, the stock market will grind lower to test that December low? This is why I do not advocate a buy and hold (hope) strategy but a flexible and opportunistic approach that flows with the market. 30-year mortgage rates have also declined indicating that it sees an economic slowdown or deflation as well. Maybe the market is trying to tell the Fed to cut rates before the economy slides into a recession. A recession could ruin President Trump’s chances of reelection in 2020. I believe Trump understands the economic and political implications of an extended trade war or recession and he will do what is necessary to get reelected. However, it may get worse before it gets better in the stock market. If things get worse in the stock market, then I expect the muni and Treasury bond markets to do well if money moves from stocks to the safety of government bonds.
President Trump promised 5% tariffs on Mexican imports ratcheting up to 25% each month if Mexico does not slow the flow of immigrants coming to the US from Mexico. I believe Trump is doing what he feels is necessary to protect America from serious consequences of an invasion of immigrants into America. Could it be that the Democrats are against the wall and silently welcome an invasion to potentially overwhelm our system and throw American into a recession to better their chances of winning in 2020? I sure hope not but it is plausible. Term limits might fix a lot of our problems and get rid of career politicians on both sides of the isle that seem to do what is best for them and less so for us. Could it be that Trump is hated so much by so many because he is not your typical politician attempting to pay back the special interests that got him elected? Trump is not part of the good-ole-boy network and that is why I think he will be very effective for America.
Now faith is confidence in what we hope for and assurance about what we do not see. Hebrews 11:11
Bottom line: I believe the 10-year treasury bond figured out that we were headed for an economic slowdown in early October as yields peaked near 3.2% and bond prices continue to advance to about a 2.1% yield today. That is over a 30% decline in yields in about six months and the yield decline does not appear to be over. All major indexes are now below their 200-day moving averages and mired in a correction. I believe the prudent thing to do is sit patiently in muni bonds until stocks come back in favor. If I am wrong, I will not hesitate to do what is right.
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. 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. 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.
NLD Review Code: 3407-NLD-6/3/2019