Back on Defense! The Issachar Fund is 100% in Cash! My line in the sand was crossed Thursday as leading stocks hit sell triggers, so I went to a Cash position. The market may be anticipating that inflation has not peaked as previously assumed, and the higher CPI number on Friday would reveal more inflation to come. Either way, I followed price and volume, and they told me to lock in some gains, so I did. It is frustrating to get invested after a follow-through day thinking the bottom was in and then suddenly sell everything because the market changed direction. Sometimes, it is easy to make money in the market, and other times difficult; the key is knowing the difference. This market is challenging, but I have seen this type of action before. Investors who preserve assets and mental capital can likely take advantage of the incredible opportunities on the other side of a bear market. We could be in a recession, and I believe the current administration is making matters worse, so I have no confidence in their ability to do what is right. My focus is changing from longs to shorts seeking to profit from a declining stock and bond market in a recession. I believe the Fed will raise rates this week, causing stocks and bonds to fall, so Cash may be a good place to wait out the carnage. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)
The Fed increased its balance sheet by $4 billion last week instead of an anticipated reduction! Powell said they would begin reducing their balance sheet and raise rates by 50 bps in June, but it has not happened yet. They created the very inflation they are trying to tame. The Fed will likely keep one foot on the gas by keeping the balance sheet steady and one foot on the brakes by raising rates to create a proverbial soft-landing. The market may be losing confidence in the Fed’s ability to right the sinking ship, so I expect more selling.
The S&P 500 Index touched the 5/19/22 bottom of support on Friday! If the market cannot hold this low, I would not be surprised to see the market drop another 10% as it begins its third wave lower since January. Junk bonds are well below their 50-DMA and have broken support which tells me that the market will likely follow suit. Credit card debt soared by $17.8 billion in April, the second-highest amount ever. The highest was March when it soared by a staggering $25.6 billion. Consumers are tapped out and using credit cards to buy the necessities of food and gas. Now we know why April Retail Sales held up. Credit card spending growth of 19.6% continues to outpace that of cars/student loans of 7.1%. Mortgage demand is at the lowest since 2001, as rates doubled and refinance demand is down 75%. 20% of home listings reduced their prices last month. What happens when we lose the housing market? It cant be good for the market.
Bottom Line: My price line-in-the-sand was crossed last week and sold all positions. Sticky inflation soared 8.6% over the last year to a 40-year high, and the genie is out of the bottle! The 10-Year Treasury Yield finished Friday at 3.156%, its highest weekly close since November 2018. Energy was doing well for us but then came under heavy selling. I followed my discipline regardless of what I thought the market would and should do. Price is the final judge, and the price is always right. Time to focus on making money in a bear market/recession. Grace & Peace to everyone!
For the Grace of God has been revealed, bringing salvation to all people. Titus 2:11
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, obtained by calling 1-866-787-8355 or visiting 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. (HCM) is not affiliated with Northern Lights Distributors, LLC.
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 making 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: 5524-NLD-06/13/2022