Northlake’s Market Cap model shifted from mid cap to large cap, primarily reflecting the history of large caps holding up better during bear markets.  The Style model is sticking with growth which makes sense given growth companies are less sensitive to the cyclical impact of recessions.

We swapped remaining client positions in mid cap to large cap.  Sales were made in the S&P 400 Mid Cap (MDY) and Russell Mid Cap (IJH), and proceeds were reinvested in the S&P 500 (SPY).  Client positions in growth indices including the Russell 100 Growth (IWF) and S&P 500 Growth (SPYG) are being held for now.

Many client positions following the models were sold during March when we began to raise cash reserves on March 9^th.  Follow-up sales were conducted later in March.  We decided that raising cash was more efficient using model positions invested in ETFs.  Efficiency came from both having large investments in the models due to Northlake’s strategy and the ability for taxable accounts to book valuable tax losses.

Over the next few days, we plan to look at each client account and rebalance where necessary within the models and overall.  We do not intend to invest cash reserves as we remain of the belief that it is better to protect against further downside than try to time a bottom.  This is consistent with our U-shaped view of the market outlook.  A good way to think about it is that we are willing to be the tortoise rather than the hare and try to win back portfolio values in a slower, lower risk fashion.

IWF and SPY 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