Protection Mode! The Issachar Fund is 100% in Cash! The S&P 500 is down over -22%, and junk bonds are down over -13% YTD, and I believe we are headed for a recession defined by two consecutive quarters of negative GDP. The Federal Reserve raised rates 75bps to fight inflation but increased its balance sheet last week. Driving with one foot on the gas and one foot on the brakes tells me we are not going anywhere fast. Rising rates increase the cost of doing business which ultimately gets passed on to the consumer in the form of higher prices leading to higher inflation. It is a vicious cycle that will likely end badly unless the market perceives a change in the destructive policies that got us here. President Roosevelt created a 10-year depression instead of a 3-year recession that caused life-changing losses for many unfortunate Americans, and I pray we are not repeating the same mistakes. I want to avoid life-changing losses, so when stocks and bonds are both in steep declines, I manage risk by sitting in money markets until the next opportunity presents itself. I recommend “keeping your powder dry” because no one knows how long this bear market will last or how long it will take to “bounce back.” (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)
An official Consumer Price Index of 8.6% and a Producer Price Index of 10.6% should demand a minimum Fed Funds rate of 10% if the Fed is serious about taming inflation! Dr. John Williams states actual inflation is 16.1%, the highest since 1980 at 20%. The current Fed Funds target rate is 1.50 to 1.75%, so we will likely see more rate increases in the coming weeks/months. The Swiss National Bank raised rates for the first time in 15 years, as did the Bank of England, Brazil, and Taiwan. Bitcoin is down 80% from its peak. Credit card debt hit an all-time high of $1.1 trillion. Average monthly rent hit an all-time high of $2000. Gas prices hit an all-time high of $5.00/gallon. Stocks are having the worst year since 1940. This may be a good time to draw some lines in the sand and act if they are crossed.
Last week, the Fed increased its balance sheet by $14 billion while simultaneously raising rates! In the press conference, Powell stated that inflation is out of the Fed’s control (it’s due to energy/commodities/war) and may not come down. Powell said the Fed’s “critical” goal is to get inflation down to 2% while minimizing unemployment in the inflation fight. We all know what the goal is, but what is the plan? A soft landing may not happen.
Bottom Line: Issachar is comfortable in Cash. Inflation is created by too much money chasing too few goods, which is now undoubtedly not “transitory,” as we were told. The Fed raised rates by 75 bps last week, which was the largest in almost 30 years. A Fed-induced recession may be the only thing left to tame inflation as the Fed falls further behind the curve. If the Fed raises rates too fast, they will likely throw us into a deep recession, killing inflation and creating life-changing losses for many Americans. Oil stocks were crushed last week as the algos hit the hottest sector YTD. Cryptocurrencies should be renamed “klepto” currencies as these so-called alternative “hedges” implode. I like to invest when I have an edge, and the market rewards us for taking risk. This is a time for defense, patiently waiting for risk to subside and stocks to build base pivot points to buy. Grace & Peace to You!
In the world, you will have tribulation. But take heart; I have overcome the world. John 16:33
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: 5534-NLD-06/21/2022