This website aims to introduce the results of our research on sector rotation in the US financial markets and is based on quantitative and Intermarket analysis. On the website you will find a brief description of the approach used in the modelling phase. This approach is supported by the Intermarket analysis within the Business Cycle. All the findings in our research are based on a quantitative approach rather than a value investing or macroeconomic approach.

This does not mean that the advances made have nothing to do with the equity valuation or the macroeconomic indicators but it demonstrates that the performance of the sectors/industries can be explained by a forward-looking approach based on bond, equity and commodity prices and the development of the Business Cycle.

Our work

Our work on Intermarket correlations and sector rotation in the US financial markets is based on quantitative analysis and no fundamentals are involved. The research and the models are based on 110 years of US equity market data, 70 years of Standard & Poor’s (S&P) GICS sectors/industries data and 75 years of Barron’s (now Dow Jones) industries data. We have also back-tested a set of data provided by Prof. Kennet R. French which covers US sectors and industries (total returns in this case) based on their four-digit SIC code from 1926.

On our website you will soon also be able to find models relating to the European, Asian and American (excluding the US) markets. However, given the limited availability of data for such markets, our research and modelling focus mainly on the US equity markets. Some quantitative techniques used for the US markets are applicable to the rest of the world and we are keen to develop further research/modelling in other geographic areas.

Business Cycle and Intermarket models

On the following pages we discuss more in detail our view regarding the correlations between the Business Cycle and our Intermarket model and how sector investing can take advantage of the different phases of the Business Cycle.

This website also introduces and explains our view regarding the effect of the Business Cycle on the Intermarket correlations and the Financial Markets. Our work consists in putting together the assumptions of the Business Cycle and the principles of Intermarket to create an investment strategy which is able to outperform the market. Our research and modelling demonstrate that a sector/industry investing strategy can outperform the market and achieve higher returns and lower risk in a consistent way in both the short and long-term.

The Intermarket analysis is not new to many market technicians as it was introduced by Martin J. Pring in the 90s with the book The All Season Investor (Wiley 1991). Also John Murphy, another technical analyst, has written relevant books about Intermarket analysis. However, the first study on Intermarket analysis was published in 1939 by Leonard P. Ayres, in his book “Turning Points in Business Cycles” and it covers Business Cycles and their turning points from 1831 to 1939. In our opinion the Intermarket correlations are still valid and they have not changed to any great extent.