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SECTOR ROTATION

SECTOR ROTATION. 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

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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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