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July 01, 2014

Mid Cap and Value Remain in Favor

There are no changes to Northlake’s Market Cap and Style models for July. The favored themes remain Mid Cap and Value for at least another month. Given the strength of the current signals, I think that Mid Cap and Value probably will last at least two more months but given volatile economic data and 2014’s sharp thematic market rotations anything is possible. With no changes for July, Northlake client positions invested with the models will continue to own the S&P 400 Mid Cap (MDY) and the Russell 1000 Value (IWD).

The models were quite stable this month. Both signals got slightly stronger but that was due more to the two month smoothing process than to changes in the underlying indicators. The Mid Cap signal strengthened the most due to the rebound in the technical indicators thanks to the two month rally in small and mid cap stocks. Small and mid cap stocks struggled early in the year, producing negative returns through April even as the large cap S&P 500 rallied. These sectors caught up in May and June and improved the technical indicators in the model relative to the end of April. With the end of April data dropping out of the two month average this month, the Mid Cap signal got a little stronger.

Performance of the models was good in June with value out performing growth and mid caps easily outperforming large caps. So far in 2014, the Market Cap Model is ahead of the S&P 500 but the Style model is trailing the benchmark.

MDY and IWD are widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts. Steve is sole proprietor of Northlake, a registered investment advisor. Northlake’s regulatory filings can be found at www.sec.gov.

Posted by Steve Birenberg at July 1, 2014 10:46 AM in Models