Market Rallies as Inflation Rises!
The Issachar Fund is about 40% invested in the Building, Chips, Electronics, Real Estate, and Software Sectors. It appears the market is not scared of COVID or higher inflation as it flirts with new all-time highs. We are in a seasonally favorable time to invest in stocks, so my bias is to get more invested. However, there are a lot of former leading stocks that the weight of heavy short selling has crushed, so I am treading carefully. The good news is cash is still sloshing around trying to find a new home, and the real estate sector seems to be under accumulation. Hard assets like real estate have been a store of value in periods of higher inflation, so I am looking for opportunities in this new normal “higher-priced” economic cycle. Gold and Bitcoin have not been the “go-to” haven expected during this inflationary cycle. The dollar is still relatively strong due to our higher-yielding Treasury bonds, so foreigners are finding better values here in the US. Junk bonds have recently seen a lot of above-average volume-selling, which means that investors have lost some of their risk appetites. If inflation is the “new normal,” I expect rates to rise, which would not be good for bondholders. The equity market may see a lot of new capital from income investors seeking higher yields as inflation erodes bond prices. I am cautiously dancing at the party with an eye on the exit seeking to capture most of the upside and avoid life-changing losses. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)
The Fed increased its balance sheet by $14 billion last week. I expected the Fed to continue “tapering” its bond purchases, but their balance sheet said the opposite. It is not what they say; it is what they do that matters. The Fed had created over $4.5 trillion since March of the COVID Crash in 2020, and a lot of that money has found its way into the stock market. This kind of liquidity injection created the inflation that everyone is now experiencing, so now the Fed will try to “tame” inflation by slowly shrinking its balance sheet, so they say. Jay Powell’s second term has not been “confirmed” yet, so he will likely keep liquidity flowing in the right direction. If Powell wants to keep his job, he will probably do all he can to appease his “boss,” Joe Biden. In the meantime, the lower-income people are typically hit the hardest in an inflationary cycle. Term limits would fix a lot of our problems.
Bottom Line: Issachar is partially invested in leading stocks that appear to be under accumulation. Inflation has arrived, and new sectors have taken the lead, so that is where I am focused. Money does not appear to be heading for the exits but instead finding a new home. Money seems to be leaving the bond market as higher inflation breeds higher rates, so equities have become the haven. Gold and Crypto Currencies do not look attractive currently.
But those who hope in the Lord will renew their strength. They will soar on wings like eagles; they will run and not grow weary, they will walk and not be faint. Isaiah 40:31
Ed Griffin (91) is the most intelligent man alive today that I know, and I recommend his books!
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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 making an investment decision. Opinions expressed are subject to change and are not guaranteed and should not be considered investment advice. For more information regarding the fund, including current performance, please visit www.IssacharFund.com. Review Code: 5728-NLD-12/13/2021.