Just as we put aside shorts and swimsuits to make way for sweaters and wool socks as the weather cools, there are times to favor certain stock sectors over others. But instead of a change in seasons, the trigger for stock-sector investing is the business cycle as it moves from bust to boom to bust.
The investing strategy is called sector rotation. It involves shifting investments to certain industries in anticipation of the next stage of the economic cycle. "The business cycle plays a big role in how markets operate," says Omar Aguilar, chief executive and chief investment officer of Schwab Asset Management.
