Sticking with Mid Cap and Style Neutrality as Breadth Expansion Odds Improving

Northlake’s thematic models are recommending mid cap and neutrality on style again this month. Both calls were successful in August amid a pullback in the Mag 7 AI-driven trade and increased chances that the Fed begins cutting the Federal Funds Rate again in September.

There will be no changes to model positions in client portfolios. These strategies will maintain exposure to the S&P 400 Mid Cap (MDY), the Russell 1000 Growth (IWF), and the Russell 1000 Value (IWD). Clients using thematic strategies excluding our models will continue to maintain broad exposure across all market cap and style themes.
Both signals got slightly stronger after updating for new economic data releases in August and incorporating recent stock and bond market trends. The internal indicators that measure stock market technical and trend indicators are firmly in favor of small cap and value, while the external indicators that measure economic indicators are more evenly split.

In August, our models performed well with both recommendations producing a gain in excess of the S&P 500. The mid cap signal that went in place at the start of July still slightly trails the benchmark over the two-month period. Year-to-date the Market Cap model also slightly trails the S&P 500. The Style mode has outperformed the benchmark for four consecutive months and is well ahead of the S&P 500’s 10% year-to-date gain.

MDY, IWF, 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.  Northlake’s regulatory filings can be found at www.sec.gov.