Rising Rates! The Issachar Fund is lightly invested as rates rise! Key employment/economic reports were released last week, and interest rates rose to peak levels. 30-Year Treasury yields rose Friday near the 4% area for the fourth time this year, indicating inflation may not be as tame as expected. The market expects the Fed to raise rates another 25bps on July 26th and possibly again on September 20th as they attempt to reduce the inflation they helped create. If rates keep rising above the 4% threshold, stocks and bonds could get hurt. Homebuilding stocks dropped as interest rates rose, which could be an ominous sign due to the multiplier effect housing has on the economy. However, if rates decline as they have four times already this year, stocks and bonds could set up for another leg higher. The market looks ahead and could be seeing an end to the Fed’s rate-raising campaign, which could be good for growth stocks. I believe the Artificial Intelligence (AI) theme is a game-changer that could have set the stage for a new bull market that started in May of this year. I have never seen a bull market end in two months, so I expect rates to decline and stocks to advance as traders return from their July 4th vacations. I expect the stock leaders that broke out of the AI gate in May to rest a while and let a new batch of sprinters take the lead. I have a list of stocks with great fundamentals building sound bases that are ready to advance from price consolidations, but I am waiting for volume to confirm the breakouts before buying. If this is a new bull market, there will be plenty of opportunities to capitalize on. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)
I believe there are times to invest, and there are times to sit on the sidelines! Issachar sat in money markets most of last year while the S&P 500 lost over -18%. Even with the impressive AI gains this year, the S&P 500 index needs to gain about 6% to break even from what it lost last year. The Fed raised rates consistently last year, and the market believes they are near the end. I am unwilling to bet my life savings on “the market will always come back” just because it always has. There are no guarantees the market will recover losses. We live in uncertain times, and what happened yesterday is history, so the only thing that matters is how we are positioned for tomorrow. Given the current political and economic environment, we are positioned appropriately. I am a chartist and try to follow the big/smart money because they leave big footprints (volume) in the sand. However, the market does not care what I think or believe, so I rely on the charts. Everything known about a stock is reflected in its price, so my focus is on price.
The Fed decreased its balance sheet by another $42 billion last week, fighting inflation by draining liquidity! The Fed expanded its balance sheet to over $9 trillion on 4/18/22 by printing money out of thin air fighting COVID. They have been unwinding their balance sheet to bring inflation down to their 2% range, but they have more to go if they want to meet their target. The more the Fed reduces liquidity, the harder it is for the market to advance. However, a ton of money is on the sidelines itching to get invested and take advantage of the AI revolution, which could fuel the fire.
Bottom line: We are invested and plan to get more invested if the market rewards us for taking risks. Managing risk by keeping losses small is a valuable lesson I never plan to repeat. My focus is on price and what the market is doing, not what I expect. Stocks moving higher on big volume are signature moves of institutional money accumulating a position. Big/smart money creates the trends we like to invest in. Thanks for your Trust and Business, and my God Bless you more abundantly!
For our sake he made him to be sin who knew no sin, so that in him we might become the righteousness of God. 2 Corinthians 5:21
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 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: 3180-NLD-07/10/2023