An investment strategy that involves exiting one sector in order to enter another, in an attempt to maximize profits or avoid potential losses. In other words, sector rotation is based on the movement of investments from one industry sector to another in response to changes in economic fundamentals and valuations in respective sectors. For example. an investor might move funds from the technology sector in order to reinvest the same in the energy sector due to bad performance staged, or expected to be staged, by technology companies.

This strategy is also known as group rotation.