There were no changes to Northlake’s models for August. The Market Cap model continues to recommend Mid Cap and the Style model still favors Value. As a result, client assets dedicated to these models will be maintained in the S&P 400 Mid Cap (MDY) and the Russell 1000 Value (IWD).
The Market Cap model had little underlying movement in its indicators and remains solidly in mid cap territory. This means that the interest rate, economic, and stock market technical indicators are pretty much split between favoring small cap and large cap.
The Style model had some slight movement toward growth with one factor changing in each direction. The consumer vs. cyclical factor, a stock market indicator, shifted from value to growth reflecting improved relative performance of consumer stocks over the past seven months. On the flip side, the yield curve factor, an interest rate indicator, moved from growth to value as the yield curve steepened with 10 year Treasury rates rising while short-term interest rates remained stable. The model factors also consider their own level even when their particular recommendation remains this same. Slight movement on this front led to the weaker value signal for August.
After struggling for much of this year, the Market Cap model performed better in July. MDY gained 6.7%, better than the 5% gain for the S&P 500. Strong performance for mid caps is expected in a bullish environment. The Style model matched the market with IWD, the Russell 1000 Growth (IWF), and the S&P 500 all rising about 5%. The Market Cap model and some nice gains in individual stocks like Apple, Comcast, Liberty Media and Liberty Global, contributed to a good month for Northlake client portfolios relative to the market.
MDY 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.