Equity Markets - Sector Rotation Strategies

CME Group’s Select Sector Index Futures Offer Effective Tool for Portfolio Strategy

CME Group’s E-mini S&P Select Sector Stock Index futures offer an “efficacious and convenient tool” for asset managers seeking to put contrarian viewpoints to work and capitalize on anticipated shifts in health care, technology and other key U.S. industries.

Banks and other financial stocks slumped worse than most other categories in the wake of the mortgage crisis, but a potential recovery could pay off by buying E-mini futures linked to that sector, while selling, for example, a companion index based on industrial companies, CME Group analysts John Labuszewski and Richard Co propose.

"Thus, the asset manager effectively may ‘underweight’ industrials and ‘overweight’ financials relative to the benchmark against which his performance is measured – presumably the S&P 500," the analysts wrote. "This strategy utilizing futures spreads to shift resources from one sector to the next offers the advantage of leaving undisturbed the underlying equity investments weighted according to the benchmark."

In addition to financials and industrials, other sectors in CME Group’s product slate include consumer discretionary, consumer staples, energy, health care, materials, technology and utilities.

Read Full Report

About CME Group

As the world's leading and most diverse derivatives marketplace, CME Group is where the world comes to manage risk. Comprised of four exchanges - CME, CBOT, NYMEX and COMEX - we offer the widest range of global benchmark products across all major asset classes, helping businesses everywhere mitigate the myriad of risks they face in today's uncertain global economy.

Follow us for global economic and financial news.

CME Group on Twitter

CME Group on Facebook

CME Group on LinkedIn