After sitting on a neutral reading for six months, Northlake’s Style model shifted to value for October.  As a result, client positions in the Russell 1000 Growth (IWF) have been sold and the proceeds have been reinvested into the Russell 1000 Value (IWD).  There is no change in the mid cap model coming from the Market Cap model for October.  Client positions in the S&P 400 Mid Cap (MDY) will be held for at least one more month.

We mentioned in last month’s update that there was a possibility that the neutral reading on the Style model would shift to value this month since the models work on two month smoothing for the final recommendation.  October’s reading is the second consecutive where the model is signaling value, although both months and the two month average register just barely in value territory.  This could lead to the model flipping back t neutral in November.  The model readings tend to be more volatile when theme changes are underway.

The shift to value largely reflects better performance for value stocks since the February low in the market.  Growth did rebound relative to value in September but the technical and trend indicators influencing the Style model are focused on two month to one year trends.  The models are trying to capture major changes in themes, which is why they take a view longer than one month.

Both models slightly trailed the benchmark S&P 500 in September but the shortfalls were quite minor.  So far in 2016, the Market Cap model has performed well, returning about 1% more than the S&P 500.  The Style model has matched the market this year as would be expected when it has spent most of the year on a neutral reading.

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.