We are sticking with our recommendations for Large Cap and Growth after reviewing the latest output from Northlake’s Market Cap and Style models.  For client assets following the models, this means we will hold the S&P 500 (SPY) and the Russell 1000 Growth (IWF) for at least another month.  Clients using thematic strategies but not Northlake’s models have exposure to Large Cap and Growth through SPY along with the NASDAQ 100 (QQQ).

Both models remain firm in their current recommendation, although each signal is a little weaker.  The changes in underlying factors are concentrated in the external factors.  These indicators are picking up a weaker economic outlook.  A weaker outlook eventually favors small cap and value as the time to invest in these more cyclical sectors is when the economy is bottoming since the stock market discounts the future.  The weaker outlook supports our continued ownership of value sectors like financials and industrials in thematic strategies.  International exposure is also favored as a value play.  We also still like health care for its defensive characteristics and ability to grow in weaker economic environments.

SPY and IWF 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.