There are no changes to the recommendations from Northlake’s Market Cap and Style models for April.  The Market Cap model remains on a mid cap signal for the second consecutive month and the Style model favors growth for the fourth straight month.  With no changes, client positions in the S&P 400 Mid Cap (MDY), the Russell 1000 Growth (IWF), and S&P 500 Growth (SPYG) will be held for at least one more month.  As a reminder, some taxable client accounts own SPYG rather than IWF due to harvesting of tax losses in December.

The Market Cap model saw a few changes for March.  Two indicators measuring short-term trends moved in favor of large caps reflecting the continued rally for the S&P 500, NASDAQ and Dow Jones, while small and mid cap indices were down in March.  One indicator shifted in favor of small caps: the ratio of coincident to lagging economic indicators.  This indicator is picking up recently weaker U.S. economic data.  Counterintuitively, this is actually a good signal for small cap performance as the market tends to look ahead and thus looks through current economic weakness to improved GDP growth.  Small caps perform well when economic activity is picking up from a low point.  Northlake’s current view is consistent with this indicator as we believe the recent slowdown in economic activity has reached its nadir and slightly better data will emerge in the second half of 2019.  The recent decline in interest rates is the primary factor supporting improved economic growth as it is a nice boost to the housing sector.

There was only one change to the Style model with the ratio of consumer to cyclical stocks moving in favor of consumer.  Consumer stocks correlate with growth, while cyclical stocks correlate with value.  As a result, improving relative performance for consumer stocks shifts this indicator in favor of growth.

MDY, IWF and SPYG 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