An investment adviser places trades in different asset classes based on the phases of the business cycle. This is an example of:

A. strategic asset allocation

B. tactical asset allocation

C. sector rotation

D. value investing

C. sector rotation

Explanation:

Sector rotation is an investment plan that seeks to exploit the economic cycle. Recall that there are four phases in the business cycles namely: expansion, prosperity (peak), recession, and recovery (trough).

In each stage of the cycle, the industries that have done their best are:

Recovery - Which is Technology and Transport. Expansion: Capital Goods, basic materials. Peak: Staples of the market, and Energy. Recession - Services and financials.

An investor utilizing sector rotation would only invest for each of the aforementioned asset classes once the market reached the correct phase of the business cycle, rotating out of the investments made in the previous phase of the business cycle, hence this is called "sector rotation."