Northlake’s models are stable for April despite the recent stock market volatility.  We are making no changes to our model-driven or thematic strategies.  Client assets following our models will remain invested in the S&P 500 (SPY) and the Russell 1000 Value (IWD) reflecting our model signals and market and economic outlook.  Thematic strategies not using our models will also overweight large cap and value along with maintaining a position in international equity markets.

The stock market is being buffeted by multiple factors including a more hawkish than expected Federal Reserve, a rising and flattening yield curve, elevated inflation, fears of slowing economic growth or a recession, and the ongoing war in Ukraine.  This creates a tricky backdrop for the stock market short-term with rapid, often daily, rotation among themes and sectors.  Longer term, Northlake believes that current strength in the labor market and consumer and corporate balance sheets will allow for continuing growth in GDP and earnings.  We still think 2022 is a challenging year for the stock market offering below-average returns with greater risk of significant downside than substantial upside.

Our models showed little underlying movement for April.  There was a slight shift in favor of small cap reflecting a contrarian view of recent weak performance by small caps and bearish investment sentiment.  The value signal strengthened slightly, driven by technical and trend indicators.

SPY and IWD 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.