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Sector Rotation Strategy: 2 Ways to Beat the Market


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The economy and markets today resemble the start of 2008.

Those six months delivered 44%, 46% and 53% gains on a few easy trades as the economic expansion began to unravel.

The Federal Reserve battled some of the same headwinds then as it is now.

Capital stopped moving between banks and financial institutions in an efficient manner.

So, not enough money could get from financial markets into the real economy to support growth.

Household debt became a burden on consumers, and rising oil prices added to the turmoil.

Those factors caused investors to change their appetites in January 2008.

Fast forward to today, and we find ourselves in a very similar situation.

 News Suggests Stock Market Will Behave Like it Did in 2008 

Two weeks ago, certain groups of stocks climbed while others faltered.

Investors favor stocks that do well over the ones that don’t. They shift their investments — or rotate them — from one sector to another.

In doing so, investors try to ensure that they take advantage of the stocks that rise and avoid the ones that falter.

After this rotation began, new headlines came flying in:

This news suggests the market will behave the way it did in early 2008.

Oil prices, interest rates and liquidity problems could fuel the rotation into new market-leading stocks. The stocks I follow are beginning to benefit in a big way — and you can benefit too.

I give you two easy ways to tap into massive gains. And you don’t have to worry about picking the right stocks.

Everyone Loves a Winner — Rotation Means Gains for You

Watch my video below to learn more about sector rotation.

In the market, there are leaders and there are laggards.

Money rotates away from leaders when they become more expensive than they’re worth. At the same time, laggards attract investors’ attention because they are cheap.

There are two reasons why stocks can be cheap:

  1. Because the underlying companies are lousy. Stay away from those.
  2. Wall Street misprices them because their industry is out of favor, not because the underlying companies are lousy.

The economic cycle explains why industries and sectors fall in and out of favor with investors.

The early stage of an expansion favors growth and momentum stocks in sectors such as real estate and technology.

Communication and tech stocks continue to outperform as the expansion matures. There is strong demand for those products and services.

Then expansion peaks and grows tired.

Inflation supports the energy and materials sectors.

Then investors begin to worry about economic growth. They seek protection and stability in the consumer staples, health care and utilities sectors.

That said, this creates new risks and new opportunities.

Here are two ways you can benefit from a sector rotation.

Rotation Strategy No. 1: Buy These ETFs for Double-Digit Profits

Exchange-traded funds (ETFs) are a way to profit from powerful trends in asset markets.

And ETFs protect you from company-specific risk. They spread your exposure across a basket of securities.

In fact, you don’t even have to bet on stocks at all.

A late-cycle rotation happened at the start of January 2008. ETFs that track stocks in the S&P 500 Index and the Nasdaq Composite Index fell 10% and 8% in six months.

But rotation delivered awesome double-digit gains on a handful of other ETFs.

  1. The Invesco DB Commodity Index Tracking Fund (NYSE: DBC) tracks a basket of commodity futures. Those contracts include gasoline, crude oil, aluminum, copper, heating oil, zinc, corn and U.S. Treasurys. This fund rose 46% in the first half of 2008.
  2. The United States Oil Fund (NYSE: USO) uses futures contracts to track the price of crude oil. This fund rose 53% in the first half of 2008.
  3. The SPDR S&P Metals & Mining ETF (NYSE: XME) tracks gold, silver, copper, aluminum and steel stocks. This group of stocks rose as much as 44% in the first half of 2008.

Consider switching capital into these ETFs today to prepare for a late-cycle rally.

Stay proactive. Keep in mind that you are trading them in fast-paced circumstances, so you’ll need to monitor your trades.

Rotation Strategy No. 2: Buy Options for Triple-Digit Gains

Two weeks ago, we issued new alerts to our Apex Profit Alert subscribers.

Prices for the natural resources and materials stocks were screaming higher.

One reader, Scott B., was quick on the draw…

He bought four call options of a stock we mentioned.

He sold the first two calls for a 100% gain, the third for 400% and the fourth for 438% … all within a week’s time.

It’s a sign of things to come.

Our Apex Profit Alert system dials in on natural resources, energy and materials stocks.

These stocks will benefit most in the late economic cycle.

Our system adapts to trend changes and exploits them.

The system triggers new signals when stocks are set to rise or fall. We call those signals “buy on black” and “buy on red,” respectively.

Those are trades that can earn you gains of 150% or more in less than a month’s time.

We use these trade signals to buy call options and put options that target individual stocks and ETFs.

Options make it simple to earn large triple-digit gains no matter the direction of stocks.

Investors’ appetites are changing.

With this system, you can make boatloads of money no matter investors’ appetites for stocks.

We’ll guide you along the way, so don’t worry about the heightened volatility.

And stay tuned for updates on investor sentiment and cycle developments.

Good investing,

John Ross

Editor, Apex Profit Alert

P.S. Check out my YouTube channel. Hit the subscribe button so you won’t miss any of the new content I post.

 

 

 

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