Sector and factor rotation

Where capital moves as expectations change.

Sector and factor rotation

| Concept | Explanation | |---|---| | Sector rotation | Capital shifts among industries as expectations change. | | Value factor | Assets priced cheaply relative to fundamentals. | | Growth factor | Assets expected to expand rapidly. | | Quality factor | Profitable, financially strong businesses. | | Momentum factor | Assets with strong recent relative performance. | | Defensive factor | Assets less sensitive to economic cycles. |

Module knowledge check

  1. How can higher real rates affect valuation?
  2. What is the difference between market liquidity and system liquidity?
  3. Why can risk assets become highly correlated during stress?
  4. What does widening credit spread suggest?

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