Research
The business cycle approach to equity sector investing
The Asset Allocation Research Team examines how a business cycle approach to equity sector investing may add value as part of an intermediate-term investment strategy.
Key Takeaways
- The business cycle, which reflects the fluctuations of activity in an economy, can be a critical determinant of equity sector performance over the intermediate term.
- The business cycle approach to sector investing uses probabilistic analysis to identify the shifting phases of the economy, which provides a framework for allocating to sectors according to the likelihood that they will outperform or underperform.
- For example, the early-cycle phase typically is characterized by lower interest rates and a sharp economic recovery, which tends to lead to outperformance by the consumer discretionary and industrials sectors.
- Generating outperformance among equity sectors with a business cycle approach may be enhanced by adding complementary analysis on industries and inflation, as well as fundamental security research.
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The business cycle approach to equity sector investing
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