As outlined in recent posts, we expected the weakness experienced by the market the last few days. Besides the poor corporate earnings, which was the catalyst we expected would cause a pullback, oil prices have spiked up again to their recent highs. High energy prices are actually part of our thesis for expecting weak earnings, as margins are being squeezed….

However, high energy prices also put a damper on consumer spending as cash is diverted to gasoline or home heating and cooling and away from discretionary spending. The cash level in Northlake’s model portfolio remains at 13%. We intend to give this current phase a bit more time before looking for a point to reinvest.