There are no changes to recommendations of Northlake’s Market Cap and Style models for October.  The Market Cap model favors large cap for a second consecutive month after six prior months recommending mid cap.  The growth signal that has been in place since the beginning of 2019 remains for another month.  With no changes to the model signals, client positions in the S&P 500 (SPY), the Russell 1000 Growth (IWF), and the S&P 500 Growth (SPYG) will be held at least one more month.

The most significant change in the underlying indicators are in the Style model.  Three internal indicators measuring stock market technicals and trends moved from growth to value.  The eight internal indicators are now evenly split.  Among external indicators that consider datapoints related to economic activity, two flipped from growth to value leaving a majority of the six indicators now favoring value.  Given the sharp rotation that has occurred in growth and value stocks since August and abrupt reversals in interest rates amid an improvement in some U.S. economic data, the shift toward value is not a surprising.  Northlake’s models sue two smoothing to reduce signal volatility.  The Style model reading for September only is neutral, so should the signals stay intact or close to intact in October, the model is poised to shift to a neutral recommendation between growth and value.

There were a couple indicator changes in the Market Cap model in favor of small caps but the single month signal is firmly in large cap mode.  The dropping of the now three month old signal shifted the overall model more firmly into large cap model.

So far this year, the Style model has performed well with s its growth signals, while the Market model has underperformed thanks to the long stretch at mid cap.  More detail on the models’ performance is included in quarterly client letters that will be emailed within the next week.

SPY, 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