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Mr. Blonde's avatar

another thoughtful note, thanks. question...on you sector rotation portfolio. you say you choose logically rather than based on historical regime performance. but safe to assume you use historical regime performance to inform the decision? what is an example of a logical choice that isn't consistent with regime performance? also, what is the current sector rotation model positioning?

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Prometheus Research's avatar

Thank you. This is a great question, and indeed something we discussed internally while constructing the portfolios. The inherent selection bias is difficult to overcome, but our “logic” was as follows:

(+) G (-) I = “valuations increasing or steady growth dynamic” (tech, disc, real estate)

(+) G (+) I = “curves steepening/cyclically sensitive” (financials industrials, materials, energy)

(-) G (+) I = “input costs” (energy, staples, materials

(-) G (-) I = “defensive” (staples, comms, healthcare, utilities)

Current exposure is consistent with (+) G (+) I. Indeed, there are caveats, limitations and, arguments for/against the portfolio choices in sector for rotation. Further, sector composition is continually evolving. We always acknowledge the tendency of the sector rotation portfolio, but take much more signal from the asset class preferences of the Market Regime Portfolio.

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Aug 24, 2021
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Prometheus Research's avatar

Thank you. We’ll be sure to let you know. Really appreciate the support!

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