Leaders Leading! Fed Keeps Buying!
The Issachar Fund is fully invested in Business Services, Chemicals, Chips, Computer, Energy, Finance, Internet, Leisure, Medical, Real Estate, Retail, Software, and Transportation Sectors. As the indexes hit new all-time highs, buyers were in charge last week, so I added to our growth stock positions. I am finding lots of growth stocks in buyable positions, especially in the software names. Earnings are being released with a warm welcome, and the markets seem to like the “guidance” they are receiving. However, on Friday, some turbulence in the Internet Content area rocked a few big stocks lower on above-average volume. Interest rates on the 10-year (1.65%) have been rising since August and are now approaching the March highs of 1.74%. If rates are not held in check near the 1.74% area and continue climbing, I believe the market could be in trouble. However, I think Jay Powell will save the day by expanding the Fed’s balance sheet buying more bonds, hoping to stop rates from rising too fast. The junk bond market has just turned down below its 50-DMA, and that tells me that investors may be losing their risk appetite. Given all the risks in the market, including the ridiculous pending tax and spending bill, I believe the risk is worth the potential reward I am expecting. I get a good feel for where the market may be heading by following the leading stocks, and the leaders are leading, so that is a good sign the market may have some gas left in the tank. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)
The Fed increased its balance sheet by $84 billion last week to another all-time high of $8.6 trillion! It is not what Jay Powel says (tapering soon). It is what he does that matters. That $84 billion of new money created out of thin air must go somewhere, and I see signs of institutional buying in many leading stocks. If the Fed keeps expanding its balance sheet at this record pace, I will likely remain bullish and optimistic. However, when the Fed actually “tapers” its bond purchases and raises rates, the stock and bond market will probably enter a bear market as we have never seen. On a positive note, I believe Joe Biden could have indicated he plans to endorse Jay Powel as Fed Chairman next year, but he wants Powel to worry and keep the skids greased on Biden’s socialist agenda. Powel will likely do his best to keep his job up for reappointment next year by printing more money and buying more bonds, hoping to keep rates low and appease Biden.
Bottom Line: Issachar is fully invested in growth stocks because I believe the risk is worth the potential reward I am seeking. Rates have been rising, and Powel wants to keep his job, so the printing presses will roll to keep rates from rising too fast. Inflation is more than transitory, and Powel must thread the needle carefully to prevent more inflation while taming rates. Interesting times!
Therefore, do not be anxious about tomorrow, for tomorrow will be anxious for itself. Sufficient for the day is its own trouble. Matthew 6:34
To honor God, Issachar is 100% committed to Biblically Responsible Investing (BRI) stocks.
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