Sector rotation

Sector rotation is money moving out of one part of the stock market and into another. The market is split into 11 sectors, such as technology, health care and energy. When investors change their view of the economy, interest rates or a big theme, some sectors gain a bigger share of the market and others lose it.

See it live on the sector flow tracker: which sectors are gaining share today, which are losing it, and a plain-English read of each one.

Most market data splits US companies into the 11 sectors of the Global Industry Classification Standard (GICS), developed by MSCI and S&P Dow Jones Indices:

• Energy
• Materials
• Industrials
• Consumer Discretionary
• Consumer Staples
• Health Care
• Financials
• Information Technology
• Real Estate
• Communication Services
• Utilities

Rotation follows a change in what investors expect. The common causes:

• Interest rates. Rising rates tend to weigh on fast growing companies and property owners. See rising interest rates.
• The economic cycle. When growth looks strong, money tends to favour industrials, materials and consumer discretionary companies. When it looks weak, it tends to move to consumer staples, utilities and health care, often called defensive sectors.
• Oil and world events. An oil supply shock lifts energy and squeezes companies that burn fuel. See oil supply disruption.
• Big spending waves. One theme can carry a whole sector, such as the money going into artificial intelligence. See the AI buildout.
• Investor mood. Some days investors reach for growth, other days for safety. See growth stock rotation and growth stocks selling off.

For the full picture of what drives prices, read what moves the stock market.

A sector can rise and still lose share if the rest of the market rose faster. It can also fall and gain share if everything else fell further. Share shows where money is moving relative to the rest of the market, which is what rotation means.

Compare each sector's share of the whole market today with its share yesterday. A sector whose share grew attracted money relative to the rest, even on a day when everything fell. Decifer's sector flow page does this live for all 11 sectors and explains each move in plain English.

How the Decifer tracker reads each trading day:

• Each of the 11 sectors is measured by the price of its sector fund, so every sector is read the same way.
• Each sector's share of the total is compared with its share at the previous close. The change is shown in basis points: 100 basis points is one percentage point.
• A sector counts as gaining or losing share once its share moves by more than 5 basis points.
• Each sector gets a one-line read, such as gaining value and share, rising but lagging the market, or falling but holding up better than the market.

Open the live sector flow tracker, or see today's read for what moved the whole market and why.

A sector rotation strategy is the idea of shifting money between sectors as the economy and rates change. Decifer does not tell you what to buy or sell. It shows where money is moving and why, so you can see the rotation as it happens and make your own decisions.