The Issachar Fund remains in Cash (100%)! The S&P 500 is down about -20%, and the NASDAQ 100 is down about -30% YTD, so Cash has been a good place to hide. The Atlanta Fed lowered its GDP forecast for Q2 to a minus 2.1% which would officially put us in a recession since Q1 GDP was -1.6%. Gas and grocery inflation is still high, but natural gas has been down over -40% since 6/7/22, and wheat has been down over -26% since 5/17/22. Inflation may have peaked, and now we might be in a recession that could last longer than most we have seen. Gold is down over -12% since peaking on 3/8/22, and Bitcoin is down around -77% since peaking on 11/9/21. The crypto collapse will likely hit consumer/corporate spending, translating into lowered earnings estimates for the semis. If the semiconductor stocks take a bath, the rest of the market will also get washed. High yield spreads are moving to new highs while Treasury 20-yr yields are down over -5% since peaking on 6/14/22, suggesting the bond market is worried the economy is slowing fast. In the last quarter, households withdrew $82 billion in equity from their homes, the most in 15 years. Real personal spending fell by 0.4% (more than expected) in June (May was revised lower), the first decline since December. Inflation is a hidden tax on everyone and can have long-term damaging effects on the stock and bond market. I do not have enough conviction on the short side, but I am still praying. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)
Last week, the Fed DECREASED its balance sheet by $20 billion; is this the beginning of the end? The Fed said it would unwind (QT) its balance sheet in July, but I doubt they will. If the Fed begins to sell its massive hoard of bonds, yields could spike higher putting more pressure on the economy as the cost of borrowing increases. If corporations can’t justify the added interest cost to expand capacity, they will simply pass on the opportunity, reducing supply. If supply is reduced and demand remains, then prices could rise. Higher prices create demand destruction. Never forget, the Fed created this “transitory” inflation, and now they are tasked with “fixing” the problem they helped create. Let free markets determine supply/demand, and let freedom ring!
Bottom Line: No changes to our 100% money market cash position. Capital preservation is essential until we get some climax capitulation selling to mark a bottom. Inflation is still among us and is a hidden tax on everyone and everything. Cryptocurrencies in late 2021 had a total market cap of over $3 trillion; today, that number is less than $1 billion. The crypto crash will negatively impact bandwidth use, cloud storage, accounting & legal services, advertising, semiconductor spending, etc. These ripple effects will likely result in lower earnings estimates that I expect to be announced in the coming days/weeks. Lowered earnings expectations could lead to more selling. Cash is King! Grace & Peace to You!
Whatever you do, do it for the Glory of God. 1 Corinthians 10:31
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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 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: 1729-NLD-07/05/2022