2022-07-12

Where will fund managers put their billions to work? What forecasting methods and principles do they use? How well can they anticipate the outcome of the market?

Money managers view the market through the lens of market cycles and economic cycles. The Sector Rotation Model is a theoretical model based on Sam Stovall’s S&P’s Guide to Sector Rotation and states that different sectors are stronger at different points in the economic cycle.

We are using this site to look at the sector rotation model: https://stockcharts.com/freecharts

Forecasters review the first 1-2 weeks of the quarter and decide where to put their money. Did they have their forecasts right this year? Let’s have a look.

Very similar to the entire first quarter shown inside.

Also very similar to the entire second quarter shown above.

Studying sector rotation is helpful in trading because knowing where the ‘Smart Money’ is moving helps you frame trades in the right markets at the right time.


The first week of Q3 is over, and we can begin to analyse and forecast for the quarter. However, holidays pockmark the first week of Q3. Mainly Canada Day on the 1st and US Independence Day on the 4th, meaning most of the market was likely on holiday.

According to this first week, Tech, Communication Services and Discretionary are all outperforming. Meanwhile, Energy, Materials, Consumer Staples, Utilities, and Real estate are all left behind.

There may be an anomaly that isn’t adding up because this doesn’t quite make sense.

If this first week is correct, we jumped from Healthcare/Utilities/Cons. Staples, straight to Technology and Discretionary, by-passing real-estate and financials. That jump is suspicious and should get our attention.

One reason may be that the last quarter saw tech stocks getting crushed, and this is just a dead-cat bounce reaction that won’t last long.