Sector rotation is one of the more popular applications of momentum. The following chart using the eleven Morningstar equity sectors will be featured in my new book on momentum investing
The equal weight portfolio shows higher returns than the S&P 500 due to mean reversion profits coming from monthly rebalancing. The results of both relative and absolute momentum are better than this. They have similar rates of return, but absolute momentum has less volatility and much lower drawdowns, even though relative momentum is more popular than absolute momentum. As expected, dual momentum shows the very best performance. My new book will have much more about this.
Morningstar Sector Rotation 1993-2013
Past performance is no assurance of future results. Please see the Disclaimer page of our website for additional disclosures.
