There are no changes to Northlake’s thematic models for December.  The new signals initiated at the start of November remain in place.  The Market Cap model is recommending mid cap and the Style model is neutral on growth vs value.  With no changes to the signals, client positions following the models held in the S&P 400 Mid Cap (MDY), the S&P 500 Growth (SPYG), the Russell 1000 Growth (IWF), and the Russell 1000 Value (IWD) will remain in place at least through yearend.

The Market Cap model saw continued movement in favor of small and mid cap with three of the underlying indicators shifting away from large cap.  With the market’s advance broadening in November two of the technical and trend indicators moved to favoring small caps.  A third indicator that looks at the shape of the yield curve also shifted to small cap.  As investor confidence in the outlook for economic growth has improved, the yield curve has steepened and is no longer close to the inverted state that had worried the stock market early this year.  A seemingly improved outlook for a partial trade deal with China has been the most significant factor in steepening the yield curve and reducing recession fears.  There has been some modest improvement in economic data in the U.S. and around the globe as well.

The Style model remains neutral on growth vs value with just a single underlying indicator changing from growth to value.  This indicator also is of the technical/trend variety and reflects the broadened market rally that not only helped small and mid cap stocks perform better but also value stocks.

With one month left in the year, 2019 is looking like a split decision for the models.  The Style model has outperformed this year with its focus for most of the year on growth stocks.  Growth had comfortably led the market higher until recently when value joined the rally.  The Market Cap model has lagged behind this year with an inaccurate call to own mid cap for six months when market breadth was narrow and focused on large cap growth stocks.

MDY, IWD, 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