Sector Rotation Analyzer

Portfolio managers, active investors, and advisors use this prompt to align sector weightings with the prevailing macroeconomic cycle — moving tactically between defensive and cyclical sectors as conditions evolve. It is particularly useful when macro signals are mixed and a structured framework is needed to cut through the noise.

You are a macro strategist helping me align my sector exposure with the current phase of the economic cycle. I will provide current macroeconomic indicators below. My current sector allocation and investment vehicle preferences are also included.

Current Macro Indicators:
[MACRO DATA — inflation rate, central bank policy rate, GDP growth rate, yield curve shape, unemployment rate, PMI readings, credit spreads]

Current Sector Allocation:
[CURRENT SECTOR ALLOCATION — sector name, current weight %]

Preferred Investment Vehicles: [ETF / INDIVIDUAL STOCKS / BOTH]

Conduct a structured sector rotation analysis:

1. **Economic Cycle Phase Identification**
   Based on the macro indicators provided, identify the current phase of the economic cycle: Early Expansion, Mid Expansion, Late Expansion, Contraction, or Early Recovery. Provide the specific data points that most strongly support this classification and note any conflicting signals.

2. **Sector Performance History by Cycle Phase**
   For the identified cycle phase, present the historically favored and disfavored sectors based on empirical cycle research. Use the standard GICS sector classifications. For each sector, indicate typical relative performance versus the broad market in this phase: Outperform, Neutral, or Underperform, with a brief explanation of the economic rationale.

3. **Current Allocation Gap Analysis**
   Compare my current sector allocation against the historically favored weightings for this cycle phase. Identify sectors where I am meaningfully overweight (potential drag) and sectors where I am meaningfully underweight (potential opportunity). Flag any sectors where my current allocation represents more than a 10-percentage-point deviation from cycle-phase guidance.

4. **Transition Watch: Next Phase Signals**
   Identify three to five leading indicators to monitor that would signal an imminent transition to the next cycle phase. Describe what each indicator shift would mean for sector rotation strategy and which sectors would benefit or suffer from the transition.

5. **Rotation Recommendations**
   Provide specific, actionable rotation recommendations: which sectors to increase exposure to, which to reduce, and which to hold. For each recommendation, provide the economic rationale and suggest specific ETFs or index exposures that provide targeted access to that sector.

6. **Implementation Caution**
   Note the key risks of executing sector rotation — including the danger of mistiming the cycle, transaction costs, and tax implications. Remind the reader that sector rotation is a probabilistic strategy, not a deterministic one, and that diversification remains the foundation of prudent portfolio construction.

Write with analytical precision. Distinguish clearly between historical pattern and current recommendation.

Prompt Variables

Replace each placeholder with your specific information:

What You'll Get

A cycle phase identification with supporting data points and conflicting signals, a sector performance history table for the identified phase with Outperform/Neutral/Underperform ratings, a gap analysis comparing current versus cycle-appropriate allocation, three to five transition signals to monitor, specific rotation recommendations with ETF suggestions, and an implementation caution section.

💡 Pro Tip

Provide macro data from at least two different sources — for example, official CPI alongside market-implied inflation expectations from TIPS spreads. When the two diverge, the AI can surface this tension and factor it into the cycle assessment, producing a more nuanced recommendation.

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