Large Cap Growth Reasserts Leadership – Northlake’s Models Agree

Northlake’s thematic model recommendations remain unchanged for June. The Market Cap model favors large cap for the 5th consecutive month. The Style model is recommending growth again after flipping from neutral at the start of May. Client accounts that use Northlake’s models will continue to hold the S&P 500 (SPY) and the Russell 1000 Growth (IWF) through at least June. Clients using thematic strategies other than our models already maintain significant exposure to large cap and growth index ETFs.

The latest readings did not show much change in their message and underlying factors. The Market Cap model remains on a very strong large cap signal, although it moved slightly toward mid cap thanks to excellent breadth during May’s stock market rally. When most stocks are participating in a rally, it is often a signal that small and mid-cap stocks will perform well in the months ahead.

Last month’s new growth signal from the Style model strengthened, reflecting renewed leadership for the Magnificent 7 in May’s rally amid signs and fears of an economic slowdown. Mag 7 earnings for 1Q25 exceeded Wall Street expectations with few signs of deceleration in underlying revenue and profit drivers.

The models are working pretty well this year. Both have produced returns slightly ahead of the S&P 500. May was a particularly good month for the current signals as Mag 7 leadership drove the S&P 500 and Russell 1000 Growth to outperform even when all style and market cap themes performed well.

SPY and IWF are widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts. Steve is the sole proprietor of Northlake, a registered investment advisor. Northlake’s regulatory filings can be found at www.sec.gov.