Northlake’s Style model flipped back growth to start 2016 after spending just one month at neutral to end 2015.  As a result, client positions in the Russell 1000 Value (IWD) were sold and proceeds reinvested in the Russell 1000 Growth (IWF).  There is no change to the mid cap recommendation for the Market Cap model.  Client positions in the S&P 400 Mid Cap (MDY) will be held at least one more month.

The Style model moved back to a full growth signal due to a change in the indicator that measures the performance of consumer stocks to cyclical stocks over a three month period.  Consumer and cyclical are a good proxy for growth and value.  The balance of the Style model is unchanged with the majority of the indicators favoring growth.

The Market Cap models remains on a mid cap signal as it has since August.  There was underlying movement toward large cap.  In fact, if all the signals are unchanged next month, the recommendation would shift form mid cap to large cap. For January, two indicators shifted from small cap to large cap, one measuring market breadth and the other measuring investor sentiment.  Overall, the Market Cap model has ten factors favoring large cap and six favoring small cap.  As a reminder, the Market Cap model indicators favor either small or large cap and a split decision leads to a mid cap recommendation.

The models performed well in 2015.  The Style model led the way, gaining over 3.5%.  The model did a good job of capturing the outperformance for large cap growth stocks in 2015.  The Market Model produced a small loss of -2.8% in 2015.  Mid cap was the favored recommendation for all but two months of the year.  Large cap would have been the best call but small cap did much worse than mid cap.  Overall, it was a solid performance for the models and encouraging after the models were updated with some major changes beginning in November 2014.

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.