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Media Talk

Sticking With What’s Been Working (And Losing Less)

There are no changes to our thematic strategies for July.  Entering the third quarter, we continue to favor large cap and value.  The bias toward value influences our ongoing favorable view of international markets on a relative basis vs. the growth-dominated U.S. market benchmarks.  Among economic sectors, we still prefer value-oriented financials and industrials.  We have upgraded our view of health care and added it to select client portfolios that use thematic ETF strategies.  We see a shift toward growth in our Style model that could lead to a move back to neutral in August.  The Market Cap model remains solidly in large cap territory.

Our preference for large cap makes the S&P 500 (SPY) our preferred investment for capitalization strategies. For Value, we are sticking with the Russell 1000 Value (IWD).  As a reminder, if our Market Cap preference is for large or mid cap, we always use large cap for Style exposure.  For international developed markets, our preferred vehicles are EFA and VEA.  For emerging markets, we use EEM and VWO.  For both cases, the stock price correlations are near 100%, so we view the ETFs as interchangeable.  For financials, industrials, and health care, we use XLF, XLI, and XLV, respectively.

Our thematic strategies performed well in the second quarter.  Losses are significant given the historic declines in the major averages but accurate thematic decisions limited losses somewhat.  The decision to shift fully to value provided the most value added.

Greater detail on our current thematic strategies and their recent performance will be included in quarterly client letters.  Due to the July 4th holiday, letters will go out via email early in the week starting July 11th.

SPY, IWD, EEM, VWO, EFA, VEA, XLI, XLV, and XLF 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.

 

 

 

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