Northlake’s Market Cap and Style models begin 2020 as they ended 2019, favoring mid caps and neutral on growth vs. value.  This means that client positions following the models will stay invested in the S&P 400 Mid Cap (MDY), the Russell 1000 Growth (IWF), the S&P 500 Growth (SPYG), and Russell 1000 Value (IWD) for at least one more month.  These recommendations have been in place since the start of October.

There was underlying movement in both models that could indicate a change is coming in February.  The Market Cap model saw three indicators shift towards large cap, while the Style model saw three indicators move towards growth.  The specific indicator changes do not send a clear message.  One common thread is from the technical and trend indicators which are picking up growth stocks reestablishing their uptrend relative to value after a choppy stretch since August.  The economic and interest rate indicators are mixed.  There is some movement related to slightly improving economic growth prospects, something we have picked up in our daily tracking of economic data releases.  Changing earnings estimates are also a factor.  The models do not always send perfectly clear signals but following them with discipline is critical to their long run success within Northlake’s investment strategy.

Our yearend client letters should go out next week.  Those will contain a full update on the performance of the Market Cap and Style models.  2019 saw a split decision with material outperformance by the Style model and significant underperformance by the Market Cap model.

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