Sector rotation


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Sector rotation

An active asset management strategy certain sectors, that tactically overweights and underweights depending on expected performance. Sometimes called rotation.

Sector Rotation

An investment strategy in which a portfolio overweights or underweights certain sectors in accordance with expected performance. Sector rotation is a form of active investment management; the portfolio manager observes market trends and alters the composition of the portfolio in order to earn the highest possible return. Sector rotation is fairly high risk, as a portfolio's systematic overweighting and underweighting means that is not efficiently diversified. See also: Markowitz portfolio theory.

sector rotation

An investment strategy involving the movement of investments from one industry sector to another in an attempt to beat the market. For example, an investor might rotate investments among consumer durables, technology, and energy securities as economic fundamentals and valuations in each of these sectors change. Also called group rotation.

Sector rotation.

Sector rotation refers to the shifting of investments among different sectors of the economy.

At any given time, certain sectors will be performing better than others. Investment managers use sector rotation strategies to capitalize on the current economic cycle and maximize profits.

References in periodicals archive ?
Montgomery is referring to the Sector Rotation Portfolio, which was 60% in bonds and 40% in stocks (evenly spread across information technology, health care, consumer staples and energy) on July 1, 2008, when the S&P 500 was at 1,285.
According to the SEC, they selectively touted the past performance of the Sector Rotation Fund (NAVFX) and specific securities recommendations they made to clients, cherry-picking highlights and omitting less favorable recommendations and other data that would have made the facts complete.
But gains have come in volatile trading in the past year, characterized by frequent sector rotations.
Such sector rotation will hit the rating of defensive earnings as risk appetite rises and as defensives are sold to buy recovery situations.
They show that aggregate portfolio rebalancing across equity sectors is consistent with sector rotation, an investment strategy that exploits perceived differences in the relative performance of sectors at different stages of the business cycle.
Kennedy was informally using sector rotation, an approach many professional investors employ to gain an edge.
"There's no mileage in chasing anything in this market, because sector rotation is so rapid," he said.
That said, there are a number of potential triggers--ranging from a rise in longer-term bond yields, a contraction in occupiers' demand for space to sector rotation as income-hungry capital moves away from real estate on to another asset class.
They are also ideal for use with sophisticated portfolio management techniques--e.g., tactical asset allocation, sector rotation strategies, hedging strategies, cash equitization, portfolio completion, account transitioning and more.
These positive indicators, coupled with a "sector rotation" by investors into defensive sectors like health and medical care stocks as the bear market took hold, helped give J & J's stock a double-digit boost in both 2000 and 2001--and allowed Larsen in 2002 to turn over the CEO reins with his head held high.
In addition, weakening global GDP growth, waning consumer demand, doubts about US and EU manufacturing strength and possible future interest rate rises all suggest scope for some sector rotation in favour of defensives generally.
The profitability of various sector rotation strategies was also examined in this study.