Northlake’s Market Cap and Style models are sticking with their recommendations of mid cap and large cap growth.  As a result, client positions that follow the models will remain invested in the S&P 400 Mid Cap (MDY) and the Russell 1000 Growth (IWD) for at least another month.

The Market Cap model moved very slightly toward large cap with one of the internal factors moving from small cap to large cap.  The adjusted advance-decline line made the switch, reflecting the narrow breadth in the market during April.  Despite positive returns generated by the S&P 500 and NASDAQ in April, indices that track small and mid cap stocks were in negative territory.

There was a little more movement in the Style model, which saw five indicators shift their recommendation.  Three went from growth to value, while two moved from value to growth. Despite these changes, the two month smoothed average of the model remained unchanged leaving the growth signal intact.

The three indicators that moved in favor of value all reflect the significant shift in the market during the second half of April when growth stocks came under pressure.  Dollar weakness, rising interest rates around the world, and the sharp rebound in oil prices during April all reversed the trends that had been prevailing for many months.  These shifts in market sentiment also led to one of the changes from value to growth as one measure of risk moved toward growth amid fears about global economic growth.  The other factor turning towards growth indicates that the quick turn in market themes in April was overdone.

Both models are performing well so far this year and since they were updated late in 2014.  However, April was not a great month as value slightly outperformed growth and large cap produced positive results, while mid and small cap indices produced small negative returns.

MDY 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.