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SECTOR ROTATION

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  1. SECTOR ROTATION

  2. Definition • Sector rotation is an investment strategy involving the movement of money from one industry sector to another in an attempt to beat the market based on economic cycles. • Using sector rotation: • Must know where you are in the economic cylce via data • The NBER usually calls recession and recovery after the fact • The stock market movement precedes the economic cycle by 6 to 12 months

  3. NBER A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.

  4. LEADING INDICATORS

  5. PERFORMANCE COMPARISON

  6. 2010 • Based on Sector Rotation • Continuation of technology & cyclicals • Rotating towards industrial, material, and energy • Based on P/E relative ratios • Based on which sector is still most off from its high

  7. 2010 RISKS • The market does not go straight up • Some type of correction • US economy • Inflation needs to remain in check • Unemployment eventually must decline • Consumer and business spending • World economies • China – growth or brink of crack? • Debt issues around the world • Currency issues

  8. 381.2 194.4 79.9 41.2

  9. Resources • http://www.briefing.com/investor/public/calendars/economiccalendar.htm • http://research.stlouisfed.org/publications/mt/ • http://stockcharts.com/charts/performance/perf.html?[SECT] • Finviz.com

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