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In this Discussion
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MJG
October 2014
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Ted
October 2014
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Comments
Indeed the referenced chart is a nice way to summarize the business cycle. Kudos to Fidelity for generating it and to Barry Ritholtz for presenting it.
But how do we investors exploit this knowledge? S&P’s Sam Stovall had an answer: Sector Rotation. He developed his Sector Rotation Model over a decade ago. He even wrote a respectable 1996 book on the subject titled “Standard & Poor's Sector Investing: How to Buy The Right Stock in The Right Industry at The Right Time”. Now that’s an aggressive claim!
Many summaries of his work proliferate on the Internet. Here is a short article that details specific sector recommendations based on the Stovall model:
http://www.corycoviello.com/sector-rotation
A key ingredient is to identify what segment of the business cycle we are currently experiencing. Several diverse opinions exist on this controversial matter. Regardless, its all fun stuff and potentially profitable. Please enjoy the article, and good luck on favorably resolving this key cycle stage uncertainty. Timing is a forever problem when making investment decisions.
Thank you Ted for alerting MFOers to sector rotation cycle thinking.
Best Wishes.
Regards,
Ted
https://scs.fidelity.com/common/application/markets_sectors/business_cycle/Business_Cycle_Sector_Approach.pdf