The Issachar Fund (LIONX), is essentially in CASH until the dust settles! All positions were under pressure last week as rates rose, so I liquidated all bond exposure. The long-term treasury bond dropped over 6% last week as the market digests a potentially less-dovish (lower rates) Fed. I believe the market was expecting the Fed to lower rates ½ point this Wednesday but now the market seems to be expecting a ¼ rate cut instead. I believe this readjustment of expectations is causing a lot of disruption/volatility in the stock and bond market and there may be more to come. While I still like the fundamentals of an environment where rates are expected to decline, the price charts are telling me a different story and that is what I follow. The charts are telling me that the “run” in bond prices may be over and yields may be headed higher. While I do not agree with the premise that rates are headed higher and we have seen the bottom in rates nevertheless I took prudent action in an attempt to limit LIONX shareholders from further losses. Gold was rising as rates were declining but gold has also come under pressure, so I hedged our gold position to buy a little time to see how things shake out. I would like to see the Fed continue to lower rates like all other major central banks. However, I believe they will try to appear “independent” and do what they think is best for the U.S. economy and not lower rates as aggressive as Trump would like. If the Fed were to lower rates to near zero like Trump suggests then I believe the economy would grow at a faster rate and Trump would get reelected next year. Will the Fed deliver a ¼ point rate cut and indicate that they may be “done” for now? All eyes will certainly be on the Fed this Wednesday! LIONX is a BRI, risk-managed, trend-following mutual fund managed like an alternative hedge fund seeking low-correlation to the major stock indexes. The Fund seeks moderate capital appreciation consistent with capital preservation. (Portfolio holdings are subject to change at any time and should not be considered investment advice.)
The S&P 500 Index is less than 1% from an all-time high! However, I am not finding a lot of stocks that I am interested in buying at this time. I am seeing a lot of “high-flyers” that were performing well now come under heavy selling pressure as money appears to be “rotating” out of “growth” and into “value”. Some of the best performing stocks this year have been “taken out and beaten down” and the selling continues in mostly the speculative cloud and software stocks. The cloud and software stocks were recent favorites, but they seem to now be under heavy selling pressure as money seems to be flowing out of the recent “leaders” and into the “laggards”. Bank stocks seem to have “caught a bid” and appear to now be a beneficiary of the money flowing out of the recent leaders. The Russell 2000 Index (small caps) which has a lot of bank and financial related stocks have perked up lately and is trading up against a declining-tops resistance line. The NASDAQ Index has continued to make constructive progress above its 50-dma and is less than 2% from its all-time high. The junk bond index is at its all-time high and that confirms to me that investors still have an appetite for risk. However, I will wait for more evidence and conviction that this rotation out of growth into value is a sustainable trend to invest in. The wrong message from the Fed on Wednesday or a “tweet” could change the tone of this “news driven” market on a dime.
Algos run the market! Since the financial collapse in 2008, central banks have been printing money (QE) in an effort to spur economic growth. However, I believe most of the QE money finds its way in the stock and bond market instead of local economies. I believe “big banks” that receive QE have sophisticated algorithmic computer programs (Algos) capable of trading billions in a nano-second based on a “tweet” or any “news driven” headline event. These Algos are void of human emotions and they could be changing the market’s “historical character” right before our eyes. That is why I firmly believe a flexible investment approach could be more valuable in the near future than one that is “ridged” and fully invested regardless of risk or a bear market. I believe the next recession may be one like we have never seen, and it could wipe out most of the fortuitous buy-and-hold index gains since 2008. However, I do not believe we are there yet. Get to know your dancing partner and always dance close to the door.
However, I consider my life worth nothing to me; my only aim is to finish the race and complete the task the Lord Jesus has given me – the task of testifying to the good news of God’s Grace. Acts 20:24
Bottom line: Rotation is occurring and may be due for a round of “testing” as the rotation is “extended” and due for a bounce in the other direction. I believe the market will eventually conclude that the Fed will have to cut rates more aggressively than the Fed wants to admit and that could produce a rotation back into bonds. However, I will invest on what price and volume (the truth) says instead on what I think. Thanks for Your Trust and Business and may God’s Grace & Peace Bless You Today!
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. Investments cannot be made in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Past performance is no guarantee of future results. S&P 500 Index is an unmanaged composite of 500 large capitalization companies. NASDAQ Composite Index is an electronic traded listing of over 5,000 active large and small companies. Russell 2000 Index is an unmanaged index of 2000 small capitalization securities. 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: 3689-NLD-9/16/2019