The ETFSector.com Top 3 Quarterly Sector Model is the most concentrated member of the TopN sector-rotation family, designed to focus capital on the three U.S. equity sectors displaying the strongest model readings at each quarterly rebalance. The strategy evaluates sector relative-price trends using a systematic framework that compares shorter- and longer-term momentum with each sector’s own recent trading history, while incorporating mean-reversion characteristics where appropriate.
The model rebalances four times annually—in February, May, August and November—using the final trading day of the month to establish the signal and the following trading day for execution. A separate macro overlay determines whether the strategy takes its sector positions or stands aside; historically, that overlay has stood the model down in 36% of quarters.
Across its 9.7-year simulated history, the Top 3 has generated a 19.0% annualized return versus 13.7% for the S&P 500, illustrating both the potential—and concentration risk—of aggressively targeting emerging sector leadership.
