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Sector rotation is an funding technique that includes shifting investments amongst completely different sectors of the economic system based mostly on the prevailing financial and market situations. The purpose of sector rotation is to capitalize on sector-specific tendencies, alternatives, and relative energy whereas managing danger and optimizing portfolio efficiency.
Sector rotation is commonly linked to the financial cycle. Completely different sectors of the economic system carry out otherwise at numerous phases of the financial cycle, influencing sector rotation methods. Every sector of the economic system, resembling expertise, healthcare, client staples, financials, vitality, and industrials, has its personal traits, drivers, and efficiency dynamics.
Whereas sector rotation can improve portfolio diversification and potential returns, it requires cautious evaluation, monitoring, and disciplined execution to navigate market cycles and sector dynamics successfully.
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