There are no changes to the recommendations from Northlake’s Market Cap and Style models for April.  The Market Cap model continues to favor large cap and the Style model remains neutral on growth vs. value.  We will not make any changes to client positions that follow our models and will hold the S&P 500 (SPY), the Russell 1000 Growth (IWF), and the Russell 1000 Value (IWD) for at least one more month.

The stock market had its worst month in a couple of years in March.  The decline that began in mid-February accelerated and reached the down 10% level that defines a stock market correction.  We provided history and analysis of corrections in this month’s client email update.  The bottom line is that corrections are common and mostly do not turn into bear markets.  Furthermore, the market is usually higher three, six, and twelve months after a correction.

The correction is caused by the volatility, uncertainty, and changes in economic and foreign policy under the new Trump Administration.  Many economists find the tariff-driven economic policy to be unwise, risking an upturn in inflation and slower economic growth.  Investors have chosen to reduce their risk profile, leading to across the board selling.  Declines in the biggest winners, including the Magnificent 7, have led the market lower.

The policy changes underway make forecasting difficult.  Decades of established norms are being upended.  In this environment, we like the current model recommendations.  Large caps are typically higher quality and will have less sensitivity to any economic weakness that develops.  The difficult in forecasting amid unprecedented change makes it a good time to be neutral on relative performance between growth and value.  Clients following thematic strategies but not using our models have broad diversification that mirrors the current model readings.

SPY, IWD, 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.