What is the primary focus of a sector rotating strategy?

The primary focus of a sector rotating strategy is to change investments across different sectors in response to market conditions and economic indicators. This investment approach involves actively moving capital from one industry sector to another to capitalize on varying performance levels among those sectors. Investors who employ a sector rotation strategy analyze economic trends to predict which sectors are likely to perform well in the near future while pulling money from sectors that are expected to underperform.

For example, during a period of economic expansion, sectors such as technology and consumer discretionary may see significant growth. Conversely, during economic downturns, more defensive sectors like utilities or healthcare might perform better. By dynamically reallocating funds between these sectors, investors aim to enhance returns and manage risk more effectively.

The other options do not align with the strategy's focus. Investing only in technology limits exposure and does not take advantage of potential growth in other sectors. Investing primarily in bonds does not align with sector rotation, which focuses more on equities. Lastly, buying and holding a single sector overlooks the opportunity to adjust the investment as market conditions change, which is a key component of the sector rotation strategy.