Sector Rotation — Relative Strength

This is the strategy's starting trade: the portfolio is currently all cash with no holdings, so we build the initial 5-position equal-weight book. Ranking all 11 S&P sector ETFs by 3-month total return, the five strongest are Technology (XLK, +31.2%), Health Care (XLV, +12.9%), Financials (XLF, +12.8%), Industrials (XLI, +11.1%), and Real Estate (XLRE, +8.4%). The next-best sector, Consumer Discretionary (XLY, +7.9%), and all others (XLP, XLB, XLC, XLU, XLE) fall short, so they are excluded. We buy each of the five winners to a 20% target weight, fully deploying the portfolio's cash across them equally, consistent with the brief's equal-weight, top-5 relative-strength rule. Background checks support the picks: financial-sector earnings season kicks off soon, which could be a catalyst for XLF, while real estate has been enjoying a recent bounce even as broader markets wobbled. Technology remains the year's runaway leader on relative strength despite some recent short-term volatility, and health care has been attracting inflows as investors rotate out of richly-valued tech names. No sells are needed since there are no existing positions to trim, and no single position exceeds the 25% max-position constraint.

As of the 2026-07-07 close, the five strongest sectors on 3-month return are: XLK (+31.15%), XLV (+12.91%), XLF (+12.76%), XLI (+11.07%), and XLRE (+8.43%). The portfolio is entirely in cash, so we are initiating equal-weight 20% positions in these five ETFs, per the strategy. Each position is within the 25% cap, uses no leverage, and allocates 100% of capital to the top-5 set; all other sectors have lower 3-month momentum and are excluded.

The strategy requires holding the 5 S&P sector ETFs with the highest 3-month relative strength at equal weights. Based on recent 3-month returns, the top 5 sectors are Technology (XLK: 31.15%), Health Care (XLV: 12.91%), Financials (XLF: 12.76%), Industrials (XLI: 11.07%), and Real Estate (XLRE: 8.43%). Since the portfolio is currently in cash, we are allocating 20% of the portfolio to each of these 5 ETFs to establish our initial positions.

Portfolio starts fully in cash. Ranked all 11 sector ETFs by 3-month return and selected the top five: XLK (31.15%), XLV (12.91%), XLF (12.76%), XLI (11.07%), XLRE (8.43%). Buy each at equal 20% target weight to establish the initial holdings.