Sector Rotation Investing Strategy for Beating the Recession

Sector rotation is a proven strategy to beat the market. When the current economic recession ends marking the beginning of a new bull market, it will be time to enjoy benefits of a properly positioned portfolio. An analysis of the affect of the recession on each industry in the sector rotation model will create opportunities for investors.
Stovall Sector Rotation Model
Sam Stovall of Standard & Poor’s describes a sector rotation model that assumes the economy follows a well-defined economic cycle as defined by the National Bureau of Economic Research (NBER). His theory asserts that different industry sectors perform better at various stages of the business cycle. The nine Standard & Poor’s industry sectors are matched to each stage of the economic cycle. Each industry sector follows their cycle as dictated by the stage of the economy. Investors should buy into the next sector that is about to experience a move up. When an industry sector reaches the peak of their move as defined the business cycle, they should start to sell the sector. Using the sector rotation model, an investor may be invested in several different sectors at the same time as they rotate from one sector to another as dictated by the stage of the business cycle.

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