There are no changes to the signals from Northlake’s Market Cap and Style models for June.  The Market Cap model continues to recommend mid cap, now for the fourth consecutive month.  The Style model remains on a growth signal, as it has been throughout 2019.  With no changes for June, client positions following the models and held in the S&P 400 Mid Cap (MDY) and the Russell 1000 Growth (IWF) or S&P 500 Growth (SPYG) will be held for at least one more month.

The Market Cap model saw a modest shift toward large cap in its underlying indicators.  Should the one month reading hold for July, the model would move from mid cap to large cap.  As a reminder, the model uses a two month moving average in order to reduce signal volatility.  The movement in favor of large cap is driven by two of the internal technical/trend indicators.  This reflects better relative performance for large caps vs. small caps over the last few months.  The external indicators that cover economic activity and interest rates have been solidly lined up in favor of large caps for a few months.  Large caps generally outperform when economic activity is slowing or investors fear slowing GDP growth.

The Style model saw a lot of movement with four internal technical/trend indicators shifting signals – two moving each way — and two external indicators moving from value to growth.  The internal indicators reflect market volatility and perhaps early signs of a topping in the long running outperformance for growth.  The external indicators are consistent with those in the Market model – growth is favored in slowing economic environments due to growth companies lesser need for a cyclical tailwind to sustain earnings growth.

So far this year, the models have a split decision.  The Style model has been right on target with its growth signal, as growth has beaten value by about 5%.  The Market Cap model has had nearly the opposite result with its mostly mid cap signal lagging large cap by a similar amount.

MDY, IWF and SPYG 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