SECTOR ROTATION AND STOCK MARKET CYCLE

SOURCE: http://www.ritholtz.com/blog/2011/02/cycles-sectors/

Stages of Sector Rotation

• Stage I:   The transition from bear market to bull. Cyclical sectors — Financials, Technology and Consumer Discretionary — outperform.

• Stage II:  Mid-to-late bull market.  Materials and Industrials outperform, as do  Energy and Telecom stocks;

• Stage III:  Nondiscretionary sectors — Health Care, Consumer Staples and Utilities — Recession proof products and services — are the most resilient as the bull begins to die.