Risk On-Fed Pivot! Issachar Update: Issachar is fully invested in a diverse group of higher-trending stocks with accelerating earnings and sales. We also have an increasing position (~14%) in gold and gold stocks as inflation erodes our purchasing power. Gold has served as a store of value and inflation hedge against more fiat money printing. Global central banks have been buying more gold, not Bitcoins, as tangible assets appreciate with inflation. Our trust in government and fiat currencies has declined while hard assets have provided a haven. Gold is trending at an all-time high and could be used as insurance against a declining dollar. The higher trending rally in junk bonds confirms this is a “risk-on” environment where dips could be used as buying opportunities. If the market expects rates to fall, the dollar will likely decline, and gold could add a little shine to our bottom line. (There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses.)
Market Update: The Fed confirmed Friday what the market already knew: recent economic data supports a rate cut on September 18th, and the market rallied on greater volume. The dollar index dropped about 1%, 10-year Treasury yields fell over 1% to a strong level of support, and gold rallied to an all-time high of over $2,500/oz. The Bureau of Labor Statistics announced its highest downside revision since the 2008 Financial Crisis. They revised 12-month nonfarm payrolls down by 818,000 jobs, meaning the monthly celebrated job creations were a miss. Instead of creating an average of 242,000 jobs every month for the last 12 months, only 174,000 jobs were created, most of which were government jobs. The Fed has pivoted from fighting inflation to fighting unemployment, which is on the rise. If the Fed is “data dependent,” how can it depend on data in real-time when it is drastically revised later?
The main reason inflation decreased from 9% to 3% was that the dollar index rallied over 27% from May 2021 to September 2022. That dollar strength brought commodity prices and the CPI down because most commodities, like oil and orange juice, are priced in dollars. The dollar rallied because the Fed was fighting (raising rates) the inflation it helped create. Higher relative interest rates attract foreign capital, and they convert their currencies into dollars to buy our higher-yielding Treasury bonds. However, the dollar index is in a downtrend, losing about 4% since June, so while a strong dollar brought the CPI down, a weak dollar will push commodity prices higher. If the Fed continues to lower rates, the dollar will likely continue to decline, which may cause prices/inflation to exceed 9%, so a healthy position in gold may be wise.
Bottom line: Issachar is “all in,” expecting the Fed to begin its rate-lowering campaign in September that could take stock prices to higher highs. The Fed is behind the curve because the market has decreased rates since April, and a soft landing is expected in this Goldilocks economy. I expect short-term rates and the dollar to decline while inflation may come back with a vengeance, but not today, so let’s follow the trend until it bends in the end. The government spent more money since January 2023 than it did during COVID. Sooner or later, the market will demand higher and higher rates on our Treasury bonds, and Congress will be forced to cut spending, but not today. Managing risk and position sizing is the key to achieving long-term financial goals. Grace & Peace to Everyone!
PS: Take your family and friends to see “The Forge,” and you will be marked.
The LORD is my shepherd, I lack nothing. Psalms 23:1
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. NLD Compliance Code: 20240826-3814519
Dexter Lyons, Portfolio Manager
Issachar Fund (LIONX & LIOTX)
337-983-0676 [email protected]
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