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The Issachar Fund (LIONX), is fully invested in growth stocks! I sold the index short because I became more convinced that this market may be headed higher. A large majority of LIONX stocks have at least two consecutive quarters of increasing sales and earnings AND double-digit earnings estimates for next year. LIONX holds about 85 individual stocks with weightings averaging a little more than 1% each. LIONX is a BRI, Trend Following, Liquid-Alternative Mutual Fund that is Actively Managing Risk like a Hedge Fund seeking low-correlation/beta/risk to the stock indexes. When my Strategy identifies a low risk environment, I seek to invest in junk bonds/growth stocks with strong technical chart patterns and sound fundamentals. During high risk environments I seek to avoid Life-Changing losses. The Issachar Fund seeks moderate capital appreciation consistent with capital preservation. The Fund’s Adviser (HCM) is Celebrating 30 Years of Actively Managing Risk! (Portfolio holdings are subject to change at any time and should not be considered investment advice.)
The Fed increased its balance sheet last week by over $45 Billion! Now that “freshly printed” money has to go somewhere, and I believe some of that “free money” is finding its way into the stock market. If I had $45 Billion of new money to spend, I would put it in the largest index funds and ETFs because, in my opinion, they are the most liquid and easiest to buy and sell.
Remember the Christmas Crash last year! From August to November 2018, global central banks began a Qualitative Tightening (QT) experiment where they reduced their bloated balance sheets of “free money created out of thin air”. I believe the market was “addicted” to this excess liquidity and when the central banks began to remove the “spiked punch bowl” from the party, many investors began rushing for the exits as they saw the “writing on the walls”. I believe it could have been a disaster if the Fed would have continued to raise rates and shrink its balance sheet. However, the Fed listened to the markets. On December 24th, 2018, the Fed Funds Rate (rate that banks charge each other for over night loans) went from 2.25% to 2.5% BUT the Fed signaled that it would reverse its tightening policy. After the market had dropped over 19% from 9/21/18 to 12/24/18, the market finally bottomed on 12/24/18 as the Fed appeared to become “sensitive” to how the stock market “feels” about higher rates. I have concluded that the market does not like uncertainty or higher rates, and it may become “concerned/correct” when the future does not look so bright. Currently, the market appears to be “content” with the outlook on rates. Yes, I am “all in” BUT I will do my absolute best to avoid any life-changing losses should the market take a turn in the wrong direction of this 11-year old bull market that started with QE injections in 2008.
The Fed insists that buying T-Bills is not QE4! The Fed says that since T-Bills do not have any “duration” it is not QE. However, it sure walks and quacks like a QE duck so I am calling it QE4 until proven otherwise. The Fed has been buying 3-month T-Bills since rates in the repo market spiked 248 basis points on September 16, 2019 which is more than double of the overnight rate set by the Fed. The 4 Trillion Repurchase Agreement (Repo) market is used by institutional investors to satisfy their short-term demand for liquidity. If the Repo market is having a hard time meeting overnight liquidity requirements, then I suspect that there may be a ton of leverage (hedge funds & Algos) in the system that the “system” is not used to seeing. Hence the need for the Fed to step in and provide massive amounts of overnight liquidity. If “leverage” is too great and something triggers a “sell off”, then we could see the market come down really hard and fast. However, I believe the Fed will do all it can to prevent any major “liquidity” issue. I remember Fed Chairman Greenspan “pumping” liquidity into the system in 1999 ahead of the “Y2K” scare where people were concerned of a potential stock market crash as the new year rolled in. The market did not crash on 1/1/2000 but is sure was a scary and uncertain time to be invested. The Fed provided excess liquidity and the market was fine. Fast forward to 9/17/19 when the Fed began rapidly buying T-Bills to provide liquidity in the Repo market. The stock market bottomed a couple weeks later on 10/2/19 and it has been “off to the races” since then. The Fed has committed to $60 Billion/month of liquidity injections until March of 2020 so I suspect the market may keep heading higher as long as the Fed keeps its promise. I believe the Fed will eventually start buying longer dated maturities and then they will be forced to call it QE4.
Junk bonds continue to trend higher which tells me that investors have an appetite for “risk”! I believe growth stocks have more “return” potential than junk bonds at this time, but I am considering junk bond positions for LIONX.
Notice below that the Fed’s balance sheet has grown over $377 Billion since September 2019! Where will all this added liquidity end up? The stock market seems to be a logical recipient as the major indexes reach all-time highs.
Chart source: Federal Reserve.gov
Bottom line: The Fed’s balance sheet continued to rapidly expand, and some of that “free money” usually finds a “happy home” in the stock market. I try to not to fight the Fed and try very hard to stay in sync with the bull and avoid the bear. Thank you for reading my Blog and please let me know if you have any questions. Jesus is the Reason for the Season and I want to wish You a Very Merry Christmas Full of Love, Grace and Peace!
Here is a link to the latest 3rd Quarter Issachar Fund Fact Sheet
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. The Fund is ESG (Environmental Social Governance) conscious, pro-life and pro-family and will not invest in securities with a negative InspireImpact Score.
For unto us a Child is born, Unto us a Son is given; And the government will be upon His shoulder. And His name will be called Wonderful, Counselor, Mighty God, Everlasting Father, Prince of Peace. She will give birth to a son, and you are to give him the name Jesus, because he will save his people from their sins. Isaiah 9:6
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. 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. Quantitative easing (QE) is a monetary policy whereby a central bank buys predetermined amounts of government bonds or other financial assets in order to inject liquidity directly into the economy. S&P 500 Index is an unmanaged composite of 500 large capitalization companies. NLD Review Code: 3925-NLD-12/23/2019