Sticking with Mid Cap and Growth

Northlake’s Market Cap and Style models are sticking with the new recommendations initiated last month for mid cap and value.  Clients that use our model strategies will remain invested in the S&P 400 Mid Cap (MDY) and the Russell 1000 Value (IWD) for at least another month.

The indicators that drive our models rely on economic data and financial market trends over recent months, meaning the recommendations do not yet reflect the war with Iran that began this weekend. Current positioning is consistent with a backdrop of steady economic growth, stable inflation and interest rates, and the recent cooling in investor sentiment toward AI beneficiaries. Historically, during geopolitical and wartime crises, markets have often experienced an initial pullback that proved short-lived, though it is far too early to draw conclusions about the present conflict given the lack of clarity around U.S. objectives, duration, and the risk of regional escalation. Oil prices bear watching, but the U.S. and global economies are less oil-intensive than in past decades. In the near term, a rotation back toward large cap and growth would not be surprising as investors weigh potential growth and inflation risks, particularly after several months of strong outperformance from small and mid cap, value, and international stocks, which are more economically sensitive and susceptible to profit taking. Should conditions change materially, we will provide an update before month end.

MDY 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.