Rebalancing & Strength begets Strength! Issachar Update: Issachar remains fully invested in fundamentally/technically strong up-trending stocks, expecting the bull to keep running! I did some minor rebalancing last week, selling weaker stocks for better names and positioning us for what I see ahead. Aerospace, building, computer, finance, medical, retail, and software are our top thematic sectors, with cybersecurity software being my favorite. Cybersecurity is a huge threat, and I expect corporations to continue spending money protecting businesses from bad actors. Artificial Intelligence (AI) is another theme we have increased exposure to, and it continues to grow. I still see plenty of stocks breaking out of price consolidations and holding gains on above-average volume. I believe the bull market that started last November has more room to run as Strength begets Strength. If you have money on the sidelines, this might be a good time to get off the bench and on the field. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)
Market Update: The S&P500 and NASDAQ indexes reached all-time highs on above-average volume, indicating institutional sponsorship! When institutional money is behind a price advance, it leaves big footprints of volume supporting the price action, which gives me great conviction to remain fully invested. It takes enormous amounts of capital to carry an index to new highs, which is an encouraging sign for the bulls.
The Fed is slowly reducing its $7.7 trillion balance sheet, but global central banks continue to flood the system with liquidity. Liquidity (printing money) is like gas to a fire that keeps the market hot. The Fed printed trillions to finance COVID lockdowns, used trillions to buy bonds, and created more inflation. They panicked and raised rates to choke off inflation, and now the market is betting (55% probability) that the Fed will lower rates in March. Since the Fed pivoted from higher to lower rates last November, stocks have been in rally mode. The Fed may keep liquidity flowing in the economy and stock market to make voters feel good before the November election. After the election, we could have a reconning as we have never seen due to our enormous debt. US household debt hit a record of $17.2 trillion in Q3 2023. Federal debt is over $34 trillion, adding about $1 trillion every 100 days ($3 billion/day of interest) with annual interest payments of $1 trillion. The government will collect about $1 trillion in taxes in 2024, which will be used to pay interest on debt and zero on principal. We cannot keep irresponsibly spending without expecting severe life-changing consequences. However, the market does not seem to care about the debt and deficits, so I will keep my eyes on the charts and alert you when it is time to worry.
The S&P 500 forward 12-month price/earnings (P/E) ratio is around 19.5. This is above the 5-year average of 18.9 and above the 10-year average of 17.6, which indicates the market is overvalued. The yield curve remains inverted (short rates > long rates), predicting a recession. Maybe that is why the Fed hinted at lower rates to stave off the recession it sees, which would hurt the incumbents. Inflation across the Western globe continues as obscene government spending continues. Governments repurposed unspent COVID lockdown money to global warming, diversity, war, and millions of random migrants. This will not end well, but there is always hope.
Bottom line: Issachar is enjoying the party gains, always with an eye on the exit! Volume confirms the price advance, indicating the bull is still in charge. The Fed may be willing to let inflation rip to knock down the coming heavily revised fake employment headlines in a recession. The Fed could be concerned about the stability of the entire financial system and will cut rates to prevent a global economic collapse because that would be too big, even for the Fed to bail out. Remember, every financial crisis in the past has been bailed out by the Fed, printing more money, creating more inflation, and devaluing the purchasing power of our dollar. We could be in the beginning stages of a stagflationary (slow economic growth with high inflation) environment not seen since the 1930s. However, the market is climbing a wall of worry, and all is well for now. When the market gets worried, it will show up in price and volume, and then we will manage the risk accordingly. Until then, let’s enjoy the ride while it lasts. May God’s Grace and Peace Bless and Keep You!
May the God of hope fill you with all joy and peace as you trust in him so that you may overflow with hope by the power of the Holy Spirit. Romans 15:13
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, obtained by calling 1-866-787-8355 or visiting IssacharFund.com. The Prospectus should be read carefully before investing. The Issachar Fund is distributed by Northern Lights Distributors, LLC., a member of FINRA/SIPC. Horizon Capital Management Inc. (HCM) is not affiliated with Northern Lights Distributors, LLC.
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 an investment decision. Opinions expressed are subject to change, not guaranteed, and should not be considered investment advice. There is no assurance these opinions or forecasts will come to pass, and past performance is no assurance of future results. For more information regarding the Fund, including current performance, please visit IssacharFund.com. 3054-NLD-01/22/2024
Dexter Lyons, Portfolio Manager
Issachar Fund (LIONX & LIOTX)
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Strategy, My Story, Biblically Responsible Investing (BRI)