iQ ETF Sector Rotation Model
FOLLOW THE MOMENTUM...with ETFs!
Sector Rotation trading strategies are popular because they can improve risk-adjusted returns and automate the investing process. Momentum investing, which is at the heart of the sector rotation strategy, seeks to invest in sectors showing the strongest performance over a specific timeframe.
Sector Rotation - with a hedge…
The iQUANT.pro ETF Sector Rotation Model selects the top 5 sectors from the following starting universe:
SHORT S&P 500*
Consumer Staples
Consumer Discretionary
Energy
Financials
Healthcare
Industrials
Materials
Real Estate
Utilities
Technology
Telecommunications
RULES-BASED SELECTION PROCESS
The iQ ETF Sector Rotation Model employs the following unemotional rules-based process:
Start with 11 sector ETFs and the inverse S&P 500 ETF.
Kick out any constituent of the starting universe that is below its 9-month simple moving average
Rank by long-term price momentum and select the top 5 ETFs
If five ETFs fail to make the cut, a Treasury Bill ETF fills the remaining buckets.
The Model reconstitutes on a seasonal quarter basis (every Feb, May, Aug, and Nov).
Potential Benefits
ETF sector rotation strategies can offer several potential benefits, including:
Diversification: Achieve broad diversification across industries and asset classes by investing in ETFs tracking different sectors, reducing portfolio volatility.
Low Cost: ETFs have low expense ratios compared to actively managed mutual funds, providing a cost-effective exposure to various sectors.
Liquidity: ETFs are highly liquid, traded on exchanges like stocks, enabling quick adjustments to portfolio holdings in response to market changes.
Transparency: ETFs disclose daily holdings, offering investors visibility into the underlying assets of the fund.
Flexibility: ETF sector rotation strategies are adaptable to changing market conditions, allowing adjustments based on economic indicators and trends.
Overall, ETF sector rotation strategies can help investors gain exposure to different sectors of the economy and potentially capture gains while minimizing downside risk.
Sector rotation strategies involve shifting investments among different sectors to capitalize on market trends. These strategies aim to enhance returns by identifying sectors likely to outperform and avoiding those expected to underperform. However, they carry inherent risks, as accurately timing sector movements is challenging. Past performance of sector rotation strategies does not guarantee future results. Market conditions, economic changes, and unforeseen events can impact performance.
*Leveraged and inverse ETFs aim to achieve daily performance objectives, but long-term performance may vary significantly from their daily goals. Investors should be cautious about expecting long-term results to match stated daily objectives.