Riding the Economic Cycle
Different sectors perform better at different stages of the economic cycle. Understanding this can improve your returns.
The Four Economic Phases
- Early Recovery: Financials, consumer discretionary, real estate shine
- Mid-Cycle: Technology, industrials, and materials lead
- Late Cycle: Energy, materials, and healthcare outperform
- Recession: Utilities, healthcare, and consumer staples are defensive
Implementing the Strategy
Use sector ETFs to easily rotate exposure. Don't try to time perfectly—gradual shifts work better than dramatic moves.
Risks to Consider
Cycles don't follow exact scripts. Keep some diversification even when rotating sectors.