The Issachar Fund is fully invested in Muni Bonds and a small allocation in Preferreds. I did not make any changes last week however, I do plan to make a few changes this week depending on my conviction level. There are a few individual stocks in the software space that look attractive, but I want to see how they respond to the China trade news. Muni bonds appear to still be under accumulation albeit at a slower pace but nevertheless there still appears to be more buyers than sellers. Our preferred stock ETFs have been trending higher and do not appear to be slowing down at this time. I remain optimistic but cautious as the stock market flirts with all-time highs looking for a new catalyst to propel it higher. (Portfolio holdings are subject to change at any time and should not be considered investment advice.)
President Trump and Chinese President Xi Jinping agreed to a cease-fire on new tariffs. However, no one knows if and when a trade deal will ever be made so I plan to just let the stocks guide my decisions. The stock market tends to be forward looking and has had a good track record of telling us what the future may hold so it might behoove us to pay close attention to what the market may be trying to tell us. Fed Chair Powell gave a speech last Tuesday saying that the market may have priced in more rate cuts than may come to pass. After his comments, the major averages declined rapidly on big volumes of distribution. That tells me that the market expects the Fed to keep lowering rates keeping the QE punch-bowl full of liquidity. I believe the market expects the Fed to do what most central banks are doing and that is printing more “free money” by keeping the Quantitative Easing (QE) alive and well to make it appear that all is well. I do not know how we “get off” the QE addiction but I believe the market will have serious “withdrawals” after being “hooked” on QE since the 2008 near financial collapse. I plan to pay attention to how the market reacts to the news and act prudently.
The Russell 2000 Index is about 9% from an all-time high. The Russell represents 2000 small cap stocks that I would like to see rally with the rest of the major indexes as a confirmation that investors are okay with taking on more risk but that is not the case. While the performance of the small caps is a concern, I tend to trust the performance of junk bonds as an indication of risk in the market. The junk bonds are near all-time highs indicating to me that investor’s hungry appetite for risk is still strong. The employment report is due this Friday on July 5th and the Federal reserve meets on July 30-31 so let’s pay attention to these potential market moving days as an indication of future stock market direction.
The prudent see danger and take refuge, but the simple keep going and pay the penalty. Proverbs 27:12
Bottom line: The market appears to be flashing a “green light” but one should never throw caution to the wind. I believe this market is marching higher with unprecedented amounts of QE induced liquidity and when the central banks decide to cut back on their party favors there will be a huge price to pay. However, it appears that the party still has “legs” and everyone is still dancing and having fun. I am dancing but I am dancing near the door, if you know what I mean. I hope you have a Happy and Blessed 4th!
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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.
Russell 2000® Index is an unmanaged index that is a widely recognized indicator of small capitalization company performance. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. Investments cannot be made in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Past performance is no guarantee of future results. NLD Review Code: 3456-NLD-7/1/2019