Moving to Large Cap Amid War Impact

Northlake’s Market Cap model shifted to large cap from mid cap for April, while the Style model remains on a value signal. As a result, we moved client positions that utilize our thematic model strategy from the S&P 400 Mid Cap (MDY) to the S&P 500 (SPY). Client holdings in the Russell 1000 Value (IWD) will be maintained. Clients using thematic strategies but not the models already have exposure to large cap and value, so no changes were necessary.

The shift to large cap was driven primarily by the model’s internal indicators, which measure stock and bond market trends and incorporate technical analysis. Following a multi-month period of strong relative performance for small- and mid-cap stocks, the March correction saw these segments decline more than large caps and break below recent uptrends. Small and mid-cap stocks typically underperform during periods of elevated uncertainty, a stronger U.S. dollar, and rising interest rates – conditions that have been reinforced by the war in Iran.

The Style model’s continued preference for value reflects a still-resilient U.S. economy, even one month into the conflict. At the same time, weaker performance from large-cap growth stocks tied to artificial intelligence is weighing on our indicators, as investors reassess the return on the significant capital being invested in AI platforms and applications.

Recent model signals have performed well. During the period the mid-cap signal was in place, MDY declined approximately 2% but held up significantly better than SPY, which fell over 6%. The ongoing value signal has also worked well, with IWD down about 3.5% since the start of 2026 compared to a nearly 9% decline for IWF.

SPY and IWD are widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts.  Steve is the majority-owner and President of Northlake, a registered investment advisor.  SPY is a core holding for a cross section of Northlake-managed accounts.  Northlake’s regulatory filings can be found at www.sec.gov.