The Issachar Fund sits patiently in Cash (100%)! The NASDAQ 100 hit resistance and then bounced lower, testing the 50-DMA line of resistance again. I did not see any fundamental changes last week other than the CPI and PPI confirming that inflation is still hot, and the Fed still plans to raise rates. Fed Fund Futures are pricing a 78% chance of a 100-bps hike on July 27th. Retail sales came in strong as consumers max out credit cards to stay afloat. I believe the records will show that we are technically in a recession (2-qtrs of negative GDP), and the Fed will likely make matters worse by raising rates in two weeks. Sounds like we are stuck in a stagflationary environment of slow growth and high inflation which could put more selling pressure on the stock market. If earnings announcements and forecasts upset the market, we could see a third and final wave of bear market capitulation selling to mark a bottom for bases to build on. I see some positive action in medical stocks, but the market risk is too high to justify any current positions. If the market turns down as I expect, the stocks that look good now will likely fall with the indexes. I do not see a lot of stocks with strong fundamental and technical chart patterns, so that is my cue to stay away for now. Anything can happen, and I stand ready to change my mind when conditions improve. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)
The Fed increased its balance sheet by $4 billion last week, which tells me they are concerned with making matters worse! The Fed knows rising rates have a dampening effect on the economy and reducing their balance sheet at the same time could cause more damage to the economy and the stock market. The Fed’s balance sheet is now equal to 36% of the US’s GDP vs. Europe’s 82% and Japan’s 135%, so the Fed may have a little more room to expand its balance sheet. It seems the Fed may have one foot on the brakes (higher rates) and one foot on the gas (balance sheet expansion) hoping to not run the economy in the ditch. I believe the (political) Fed will raise rates one more time and then be pressured to lower rates ahead of the November election. If I am right, the market will cheer for lower rates, and stocks could be attractive again.
Bottom Line: My perception of higher risk does not warrant exposure, so I will patiently build my watch list of stocks for when conditions improve. Until the odds are in our favor, I will exercise discipline and step aside until I can find good setups to buy. Every bear market has recovered 100% of the time but how long it takes to recover is the question no one can answer. I prefer to protect mental and physical capital during periods of higher risk so we can take advantage of the incredible opportunities once the market decides to trend higher. Grace & Peace to you and your loved ones!
If you are led by the Spirit, you are not under the law. Galatians 5:18
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: 5639-NLD-07/18/2022