Relative Rotation – Unlocking the Hidden Potential (Part 1)
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Investors seeking to optimize their portfolio returns through bull and bear markets have various options. They can shift asset allocations among stocks, cash and other asset classes based on perceived risk and valuations. Hedging is another popular alternative. At times, options trades, short positions, and inversely correlated assets like bonds can provide stability during bear markets and safety when bull markets are in their final stages.
Lastly, there is relative rotation.
Relative rotation, which can and should be employed with other tactics, entails shifting among stocks, sectors, and stock factors. The strategy adds significant value to portfolio management if done well.
Part one of this article defines relative rotation and presents charts that will stun you, as they did me and my team. Part two will share my firm’s proprietary relative-rotation models and tools we offer SimpleVisor subscribers. These tools allow you to spot relative rotation opportunities and take advantage of opportunities that are not well followed.