The Issachar Fund (LIONX) – Risk Managed BRI – is fully invested in Muni Bonds, Mortgage Bonds, International Bonds and Gold. I increased allocations to our bond position by adding a mortgage bond ETF last week as my bond conviction level increased. I am concerned with the current annualized growth rates of our positions, but I believe we are seeing a “flight to quality” that could last longer than we have been accustomed to. Investors appear to be selling riskier stocks and buying bonds in anticipation of lower rates. Lower anticipated rates might suggest that bond traders are expecting an economic contraction or a recession in the near future. I do not believe we will see a US recession until after 2020 because Trump wants to get reelected and he will do everything in his power to avoid a recession. However, if the stock market decline accelerates beyond its next significant level of support which is about 2% lower then “all bets are off” and we could be headed for a significant economic slowdown. Gold is currently trending higher near a six-year high and I would expect gold to do even better in a “panic” type stock market sell off should one occur in the near future. I still find it very hard to make a case for a rising rate environment causing bond losses. That is the main reason for being so bullish on bonds. If I am wrong, I will do what is necessary to avoid life-changing losses and keep shareholders in line with our objective “seeking moderate capital appreciation consistent with capital preservation”. (Portfolio holdings are subject to change at any time and should not be considered investment advice.)
Are the “gloves” finally off for good in the U.S.-China trade war and are we ready for a bare-knuckle brawl? I suspect there is a good chance that the trade war could escalate in very short order if both sides try to “one up” each other in punitive fashion. If goods can’t cross borders, armies usually do and no one really “wins” if that occurs. Trump recently said that we do not need China and we would be far better off without them then he encouraged US companies to look for a China alternative. If things got really bad for the US, I believe the Fed would lower rates and possibly start another round of QE money printing trying to stave off an economic contraction. However, that would likely “kick the can down the road” and eventually lead to a potential stock market crash. Fed Fund Futures now expects 3 rate cuts over the next 3 Fed meetings which would bring the target rates down to 125-150 bps by the end of the year. The market appears to have a high degree of certainty regarding a rate cut at the next Fed meeting on September 18th. Remember what happened in December (down 19%) when the market did not get what it expected? The U.S. dollar’s 17-year high against a major basket of currencies is forcing global central banks to be even more accommodative as they race to zero. China has already indicated easier money is in the cards and Germany mentioned they could provide fiscal stimulus, if needed, to combat a recession if the European Central Bank restarted QE. German 10-year bund yields now stand at a record low of ‑0.71%. Imagine loaning Germany money expecting to get back less than you loaned them in 10 years. Should anyone loan money to Germany and NOT expect to get paid for it? Well think about it this way, Germany is getting paid to borrow money. The race to negative rates appears to be accelerating across the globe. Mexico surprised us with a rate cut which was the first one in five years. Canada’s yield curve inverted by the most in nearly two decades putting pressure on the Bank of Canada to act. If the US market does not get the rate cuts it is expecting, then things could get really ugly quickly. This market is not your “grandfather’s market” and it is more influenced by news related computerized trading instead of traditional long-term investment buying by institutions. I believe “it is different this time” and one should adapt to the “changing times” and remain flexible in order to survive and succeed. We live in interesting times!
Global economic growth is slowing and central bankers around the world are racing to zero percent (and lower) rates hoping to promote growth! The more we have of something the less valuable it can become so producing more dollars out of this air tends to devalue its purchasing power. The Bible references a “one world currency” and I believe we could be headed in that direction especially as more fiat currency gets “printed” and thus devalued. Since QE started after the financial collapse in 2008, new debt-based capital was used to buy hard assets and lower rates led to record levels of stock buybacks. Every time the Fed tried to tighten its monetary base, “taper tantrums” resulted in stock market corrections forcing the Fed’s hand to continue printing. QE seems like throwing gas on a fire, but one would think it has to burn out at some point. As long as QE continues, I expect hard assets to appreciate and fiat currencies to decline. Gold is also trending higher due to the “fear trade” as investors seek shelter in something that historically had a “store of value”. Gold is “the” hard asset I expect to continue to appreciate in value as investors become more convinced that bigger government is not the solution. I suggest we seek a solution bigger than government.
And the very hairs on your head are all numbered. So, don’t be afraid; you are more valuable to God than a whole flock of sparrows. Luke 12:7
Bottom line: Stocks are in a downtrend and bonds are in an uptrend! Uncertainty is rampant. I believe Trump holds most of the cards and can decide how he wants to play them. Stay focused on the bottom line. It is easier said than done but I believe that is what needs to happen in order to be successful in the long run. Decide for yourself what is “fake” and what is “real”. I really appreciate your Trust and Business! Help me spread the “Good News”. Grace & Peace to Everyone!
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, which can be obtained by calling 1-866-787-8355 or visiting https://www.LIONX.net. 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, Inc is not affiliated with Northern Lights Distributors, LLC.
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. If the Fund’s uses hedging instruments at the wrong time or judges market conditions incorrectly, the hedge might be unsuccessful, reduce the Fund’s investment return, or create a loss. The use of leverage can magnify the effects of changes in value of the Fund and could cause investors in the Fund to lose more money in adverse environments. 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. If the Fund’s uses hedging instruments at the wrong time or judges market conditions incorrectly, the hedge might be unsuccessful, reduce the Fund’s investment return, or create a loss. The use of leverage can magnify the effects of changes in value of the Fund and could cause investors in the Fund to lose more money in adverse environments. Biblical Responsible Investing (BRI) is the term used to describe the activities of Christian investors who purposely align their investment choices to support their Christian beliefs. NLD Review Code: 3645-NLD-8/26/2019