There are no changes to the recommendations form Northlake’s Market Cap and Style models for April.  Growth remains the favored Style as it has been since the start of January.  The Mid Cap signal also stays in place for the third consecutive month.  With no changes to the model signals, client positions in the S&P 400 Mid Cap (MDY) and the Russell 1000 Growth (IWF) and S&P 500 Growth (SPYG) will remain in place at least one more month.

The underlying indicators that drive the model signals were mostly stable for April.  One indicator in each model flipped.  For the Market Cap model, a measure of coincident to lagging economic indicators moved from small cap to large cap reflecting recently improved economic data.  This is a contrary indicator which favors large caps when the economy is improving and small caps when the economy is weakening.  The idea is to rotate to small caps when the economy is weak in anticipation of the next move.  It is important to remember that stocks look ahead and discount the future.  The shift in this indicator contributed to a move towards large cap for the overall Market Cap model but the signal remains mid cap for now.

The Style model saw a shift in the ratio of cyclical stock performance to consumer stock performance.  This indicator is short-term and shifts direction often.  It moved from growth to value as the performance of cyclical stocks has improved.  The recent rally in energy stocks with oil moving higher is a contributor.  The Style model signal remains the same strength this month despite this indicator.

The models have had a split decision so far this year.  The Style model growth signal has worked well as growth has easily outperformed value so far in 2019.  The Market model is lagging the S&P 500 thanks to underperformance of mid cap in March.  Mid Cap picked up in April, matching the S&P 500 return and exceeding the return on small caps.

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