The stock market is off to a great start in 2023 in line with Northlake’s Market Outlook anticipating more volatility, avoidance of a severe recession, and positive returns in 2023.  We are encouraged that our models, favored themes, and individual stocks are off to a good start.

Our Market Cap model favors mid cap again this month after shifting from large cap to mid cap (MDY) to start the year.  The Style model remains neutral between growth (IWF) and value (IWD).  The shift to mid cap looks good so far as small and mid cap outperformed large cap in January.  The expansion in market breadth to companies of all sizes is also evident in strong returns for both growth and value so far this year.  In our thematic strategies that do not use our models, we have maintained a modest bias toward value and small/mid cap and we continue to believe that is the best approach.  Our outlook for a mild recession at worst accompanied by an end to Fed tightening in the spring supports continued good performance from these themes.  We also maintain exposure to international equities across many client strategies.  Intentional performed relatively well last year with performance accelerating in the fourth quarter and continuing in January.  A weaker dollar is now joined by China’s COVID reopening as bullish underpinnings for international equity performance.

Northlake’s individual stock portfolio is off to a good start this year, with earnings reports still due from most of our holdings.  Disney (DIS) and Meta Platforms (META) are each up 24% this year as they rebound from awful performance in 2022.  Neither has reported 4Q22 earnings.  Nexstar (NXST), Sony (SONY), and Comcast (CMCSA) are up between 15% and 18%.  Only CMCSA reported earnings and we sold the shares shortly thereafter.  Part One of our 4Q22 earnings review blog post discussed the sale of Comcast.  Alphabet (GOOG/GOOGL), Apple (AAPL), and T Mobile USA (TMUS) are up 8-10% in 2023.  TMUS reported good 4Q22 results and initiated solid 2023 guidance.  AAPL and GOOGL report this week.  IBM (IBM), Home Depot (HD), and Walmart (WMT) have lagged with IBM selling off after a mixed 4Q22 report.  More comments on IBM can also be found in our Part One 4Q22 blog post.  Home Depot and Walmart report later in February.

MDY, IWF, IWD, DIS, META, NXST, SONY, GOOG/GOOGL, AAPL, TMUS, IBM, HD and WMT 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.