Subject: Rotating Back to Growth! Looking Better!
The Issachar Fund purchased more stocks last week as the market appears to be rotating back into growth stocks which could bode well. Higher P/E Tech stocks, as represented by the NASDAQ 100, had nice gains as it approached its all-time high. I like to see the Tech stocks come back to life as the inflation trade may indeed be transitory. I believe the inflationary pressures we have recently seen are temporary phenomena because the 10-Year Treasury Yield dropped to its lowest level since early March. If the market were concerned with inflation, I believe rates would be trending higher instead of lower. As rates continue to fall, banks and related financial stocks have been experiencing selling pressure as their spread margins begin to decline. CPI inflation came in at a 13-year annualized high of 5%, but about 1/3 of the gain came from rising used car and truck prices. The CPI number was not a major market mover, resulting in a rotation of the interest-sensitive stocks into the higher-PE and PE expansion tech/growth stocks. I view this rotation back to growth as a positive one, and that could act as a catalyst to propel the market beyond its all-time high line of resistance. Junk bonds also confirm a “risk-on” environment as it trades higher above its 50-day moving average. This ensures that investors’ appetite for risk is increasing, which gives me more conviction to get more invested. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)
The Fed increased its balance sheet by another $16 billion last week to an all-time high! The Fed still appears to be on our side, supporting the market with liquidity as needed. It is wise to not “fight the Fed,” so I will go with the flow and stay invested in growth stocks. I believe the Fed is creating a liquidity bubble that will eventually burst and do a lot of damage to investors who chose to stick their heads in the sand. I do not know when this money creation experiment will end, but I know nothing goes up forever without significant corrections along the way. Until then, let’s enjoy the ride.
Bottom Line: The market is looking better, and Issachar is buying growth stocks. I am more confident that my growth strategy will outperform, and we will be rewarded for taking risk. Money is rotating out of cyclical stocks back into growth companies that dominated the market last year, and that gets my blood flowing in the right direction. Old stock market leaders are perking up and regaining their leadership roles, which could be what takes us higher. I find peace in knowing that God not only loves me, but he likes me too, and he feels the same about you!
Steady plodding brings prosperity; hasty speculation brings poverty. Proverbs 21:5
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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 and are not guaranteed and should not be considered investment advice. For more information regarding the fund, including current performance, please visit www.IssacharFund.com. Review Code: 5294-NLD-6/14/2021.