Sector Rotation Powers Strong Performance

| January 9, 2015 | 0 Comments

sector rotationThe sector rotation model is one of the most powerful tools for investors.

In short, this active investment strategy moves money from one sector to another in an effort to find investments that outperform the overall market.

sector rotation model

Over the last six years, I’ve been using these powerful trends to deliver strong performance to everyone that subscribes to the Sector ETF Trader.

One thing’s for sure, 2014 was very different than 2013. First off, the S&P 500 was up 12.5% in 2014 after being up more than 30% in 2013.

This lived up to our expectations that 2014 would be a positive year for US large cap stocks, but it would be a smaller gain than 2013.

We had some great success and some other trades that didn’t work out as expected. Let’s take a look at some of the highlights…

The good…

We closed 13 trades in 2014. The average hold time was about six months.

Five of those were for gains of 20% or more. Those ETFs were Health Care Select Sector SPDR (XLV), Guggenheim S&P 500 Equal Weight Technology ETF (RYT), First Trust Global Wind Energy (FAN), iShares Transportation ETF (IYT), and First Trust Consumer Staples AlphaDEX Fund (FXG).

As you can see, we were able to capture profits in several sectors. This was due to the changes in sector leadership throughout the year. And our sector rotation strategy used these changes to deliver solid gains throughout the year.

The not so good…

It wasn’t a perfect year for us… we had a few trades that didn’t go as planned. The good news is the use of stop losses to control the downside risk of our trades caused the losses to be much smaller than the gains we realized last year.

The biggest thing that hurt trades like Market Vectors Unconventional Oil & Gas ETF (FRAK) and Morgan Stanley Cushing MLP High Income Index ETN (MLPY) was the 50% drop in crude oil prices.

Needless to say, I didn’t expect a 50% drop in oil prices in 2014 and I don’t think I know of anyone that called that one correctly.

The future…

Right now, the drop in oil prices has led to distinct winners and losers.

The winners are anyone that consumes oil. The industrials, transportation stocks, and consumer stocks have been soaring due to the drop in oil prices.

The losers are anyone that is tied to energy. We’ve seen oil and gas producers, oil tankers, energy infrastructure, and even renewable energy stocks take a hit as oil prices have fallen.

The current portfolio of 10 ETFs in the Sector ETF Trader are positioned to take advantage of this trend as well as other powerful trends in 2015.

What’s more, I’ll continue to research and find the best opportunities for subscribers to make money throughout the year.

Good Investing,

Corey Williams

Note: Corey Williams writes and edits Sign up for our free ETF reports and free e-letter at We’re devoted to helping you make more money from ETFs.

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About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets three times a week. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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