Objective
Seeks long-term capital appreciation by dynamically allocating across the eleven GICS sectors of the S&P 500, overweighting where valuation and catalyst align and underweighting where they do not.
Active Sector Rotation
Dynamic active management across S&P 500 sectors, guided by valuation and catalyst – refined over more than twenty years.
Investment philosophy
The strategy starts with a valuation screen – which sectors look attractive relative to history and to each other – then overlays fundamental analysis on earnings trends, margins, and credit conditions, and waits for catalysts that can re-rate the sector. It uses valuation and momentum inputs, but it is neither a pure value nor a momentum strategy.
It is a question we ask every day: where do fundamentals support growth, and what's going to make the market recognize it?
The goal is to stay invested in equities, and cash can reach up to 20% of the portfolio. Dynamic means we rotate between sectors based on conviction; it does not mean moving in and out of the market.
The framework has been refined over more than twenty years.
Overview
Approach
A quantitative valuation screen (P/E, P/B, P/S) is paired with a qualitative review of forward catalysts. The goal is to stay invested in equities and rotate between sectors; cash can reach up to 20%.
Implementation
Each sector view is expressed through a sector ETF chosen for how purely and cost-efficiently it captures the sector. The portfolio typically holds 5 to 10 sector ETFs, which together hold hundreds of underlying stocks.
How it works
Three steps from the benchmark's sector weights to the portfolio's active weights.
01
Start with the market
S&P 500 sector weights, the benchmark every position is sized against.
Information Technology33%
Financials12%
Communication Services11%
Consumer Discretionary11%
Health Care10%
Industrials9%
Consumer Staples5%
Energy3%
Utilities2%
Materials2%
Real Estate2%
Total100%
Approximate S&P 500 weights, shown for illustration.
02
Apply Main's lens
Three tests every sector has to pass before it earns an active weight.
- i.
Valuation discipline
Identify sectors trading at meaningful discounts or premiums, versus their own history and versus the market.
- ii.
Fundamental support
Review earnings revisions, margins, industry trends, quality, and growth to confirm the setup.
- iii.
Catalyst path
Confirm an observable catalyst, such as a shift in policy, rates, commodities, regulation, or the cycle, that can re-rate the sector.
03
Set active sector weights
Tilts relative to the S&P 500, shown as a hypothetical example.
Overweight
Added exposure where conviction is high.
Information Technology Financials Industrials Energy
Market weight
Near the benchmark where the outlook is balanced.
Health Care Communication Services Consumer Discretionary Materials
Underweight
Reduced exposure where the risk and reward look poor.
Consumer Staples Utilities Real Estate
Hypothetical example, not current positioning.
The four inputs behind each sector view
The four inputs are read together; none of them stands alone.
01
Long history
Compare each sector against its own cycle history and its valuation relative to the market, over decades.
Sector relative performance vs. market (illustrative)Sector index / market index
2002200820152020Today
Cycle contractions Sector relative performance
02
Valuation extremes
Focus on meaningful discounts and premiums; neutral readings carry less signal.
Historical valuation percentile
0%25%50%75%100%
Cheap0–10%
Neutral10–90%
Expensive90–100%
Percentile rank vs. the sector's own history.
03
Fundamental momentum
Review revisions, margins, breadth, quality, and growth to confirm the setup.
Earnings revisions
Margin trend
Breadth
Quality trend
Growth trend
Positive Neutral Negative
04
Catalyst path
Identify policy, rate, commodity, regulatory, or cycle shifts that can re-rate the sector.
- Policy and fiscal direction
- Rate and liquidity backdrop
- Commodity, regulation, or cycle inflection
Resulting sector allocation
Underweight
Consumer Staples Utilities Real Estate
Market weight
Health Care Communication Services Consumer Discretionary Materials
Overweight
Information Technology Financials Industrials Energy
Hypothetical example, not current positioning. The current positioning is shown below.
Current sector positioning
How the portfolio is tilted across the eleven GICS sectors versus the S&P 500, as of last month-end. Refreshed monthly.
Where it fits in a portfolio
A typical client allocation and its growth bucket, with Active Sector Rotation as the U.S. equity core.
Talk with us about Active Sector Rotation
Walk through the current positioning, the philosophy, or how it would fit alongside your existing core.