Sticking With Large Cap and Value
There are no changes to Northlake’s Market Cap or Style model recommendations for June. As a result, clients using our model-driven strategies will maintain current positions in the S&P 500 ETF (SPY) and the Russell 1000 Value ETF (IWD). This marks the third consecutive month favoring large-cap stocks and the fourth consecutive month favoring value stocks.
The stock market remained narrowly led during May, with much of the strength tied to companies benefiting from artificial intelligence investment and related technology spending. Even so, the underlying indicators that drive our models changed only modestly. Economic data remained generally constructive despite heightened geopolitical uncertainty surrounding Iran and the potential implications for energy markets, inflation, and investor sentiment.
Within the Market Cap Model, internal stock market technical and trend indicators continue to strongly favor large-cap stocks. External indicators are more balanced, reflecting an economy where some areas are experiencing strong growth while others remain under pressure. This combination continues to support a preference for large-cap exposure.
The Style Model also remains unchanged. Although headline market returns have often reflected strength in growth-oriented companies, our internal indicators are more balanced than broad market performance would suggest. Data-center-related industrial companies and semiconductor businesses tied to infrastructure spending have provided opportunities within the value universe. External indicators also continue to favor value, supported by resilient growth and improving economic data over recent months.
Narrow market breadth and periodic rotations between themes have contributed to increased month-to-month volatility in relative performance. Still, both current model signals continue to perform well compared to prior recommendations, reinforcing the value of maintaining a disciplined process rather than reacting to short-term market fluctuations.
Looking ahead, we are focused on whether market leadership broadens, whether earnings from companies tied to AI-related investment continue to support expectations, and how developments involving Iran and oil prices affect confidence and inflation. For now, the model signals continue to support maintaining exposure to large-cap and value-oriented investments.
Northlake Capital Management, LLC is a state-registered investment adviser. Registration does not imply a certain level of skill or training. Additional information about Northlake, including current registration status, is available through the SEC’s Investment Adviser Public Disclosure website. This material is for informational purposes only and is not investment advice or a recommendation to buy or sell any security. Investing involves risk, including possible loss of principal. Past performance does not guarantee future results. Northlake, its employees, and clients may hold positions in securities referenced. Opinions are as of the publication date and are subject to change without notice.
