Market Update: 09-03-19

The Issachar Fund (LIONX) (BRI, Risk Managed, Trend Following, Alternative Hedge Fund Like Mutual Fund, seeking low-correlation) is fully invested in Muni Bonds, Mortgage Bonds, International Bonds and Gold.  Our current positions have performed well.  I am a “trend follower” at heart which means I look for up-trends (mainly) or down-trends and try to position LIONX with the major trend.  By prospectus, LIONX can pretty much invest wherever I believe we can achieve a good risk-adjusted return.  My risk management style historically tends to error on the side of caution and thus has produced a lower volatility (risk) return over a higher volatility (risk) index.  I try to stay invested in trends as long as they perform and sell them when it is time to move on seeking to catch the next “wave”.  LIONX is a mutual fund but I manage it like a hedge fund in that LIONX can be long, short or in cash depending my perception of risk.  If my perception of risk is low, then I look for low risk opportunities and during higher risk environments I tend to hedge or sell positions down to my comfort level.  Bottom line, I believe the lower interest rate trend is our friend which is why I am bullish on bonds, so I plan to go with the flow until the trend changes.  (Portfolio holdings are subject to change at any time and should not be considered investment advice.)

The major indexes have rallied back up towards resistance at their 50-day moving averages (dma) stuck in a 4% trading range since August 1st.  August has been the most volatile month of 2019 and volatility has been a marker of trend changes so we could be on the cusp of a down trend in stocks.  Volatility is often indicative of uncertainty and there is plenty (China, Iran, recession, etc.) to be uncertain about.  No one knows the future, so we follow “price” because it represents the sum of current buyers and sellers.  I believe price reveals the “truth” about the risk in the market and the direction of the trend.  Historically, money seeks a “happy” home where it is valued.  Volume often reveals the power behind the price movement and volume lately has NOT been excitingly above average.  Therefore, I conclude the stock market trend is under pressure and the bond market trend is consolidating and possibly getting ready to resume trending higher.

Negative yielding sovereign debt is now above $17 Trillion which means 30% of all sovereign bonds are yielding below zero.  Just a couple months ago, that figure was $15 Trillion and there is more likely to come especially since nine major economies are in or on the verge of recession.  The U.S. does not have negative yielding government bonds yet.  However, I believe we are headed in that direction especially if we want to remain competitive in global trade.  The dollar has been trending higher (17-year high) which equates to a higher relative value against other major currencies and a higher dollar tends to hurt U.S. export companies.  Foreigners converting a weaker currency to buy a stronger dollar cost them more therefore they typically buy less which could hurt U.S. companies who rely on exports.  The lower our interest rates go, the less attractive it could make our dollar, so I expect U.S. interest rates to continue lower in an effort to make us a more competitive trading partner.  President Trump is keeping constant pressure on the Fed to lower rates and I believe they will do so at the next Fed meeting on September 18th especially now that Trump imposed a 15% tariff on Chinese imports with more to come on December 15th if a trade deal is not struck.  Keep in mind, this is a NOT a trade war like we had in the 1930’s with all trading partners, it is just a skirmish with China, and I believe America will win.

I believe the stage is set for a continued rally in Gold as investors seek hard assets to protect against a declining fiat currency.  I believe the uptrend in gold is more of a “hard asset” play and less of a “safety” trade.  As rates race to zero and below, I would expect investors to continue to accumulate gold as a store of value.  It still does not make sense to me to pay someone to take your money yet that is the result of a negative yield.  Since the U.S. stopped backing the dollar with gold in 1971, the value for the dollar has seen a steady decline in value (purchasing power).  The declining value of the dollar will likely continue as more dollars are created by the Fed out of thin air and I do not believe this QE unwind will be a smooth landing.  We are not there yet, but I would keep an eye on the exit in case we get a “black swan” event that could result in life-changing circumstances.  My job is to avoid life-changing losses and keep LIONX shareholders in line with the objective of “seeking moderate capital appreciation consistent with capital preservation”.

Once you were alienated from God and were enemies in your minds because of your evil behavior.  But now he has reconciled you by Christ’s physical body through death to present you holy in his sight, without blemish and free from accusation.  Colossians 1:21-22  (Good News: we have ALL been reconciled back to God at the Cross and heirs of the King whether we Believe or not!)

Bottom line:  The major stock indexes are stuck in a downtrend and trading below their 50-dmas while bonds continue trending higher!  China tariffs are muddying the waters with more uncertainty and the market does not seem to like it.  I continue to like bonds and gold at this juncture, but I will not hesitate to “right the ship” should we start to take on dirty water.  I enjoy managing money and I really value your Trust and Business so please 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: 3649-NLD-9/3/2019

 

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