Sector Rotation

The movement of investment capital from one industry sector to another.

What Is Sector Rotation?

Sector rotation is the strategy of moving investment capital from one industry sector to another based on where we are in the economic cycle, shifting market conditions, or emerging trends. It's one of the most important concepts in modern investing.

The Economic Cycle

Different sectors perform best at different stages of the economic cycle:

• Early recovery: Financials, consumer discretionary, real estate tend to lead.
• Mid-cycle expansion: Technology, industrials, and materials outperform.
• Late cycle: Energy, healthcare, and consumer staples become defensive havens.
• Recession: Utilities, healthcare, and consumer staples (defensive sectors) hold up best.

Modern Sector Rotation

In 2025-2026, we've seen dramatic sector rotation driven by AI disruption. Capital has rotated from traditional software companies into semiconductor and AI infrastructure stocks, then began rotating back as software companies adapted. On EarningsShot, tracking which sectors are seeing earnings beats vs. misses can help you identify rotation trends early.