Sector Rotation (Faber QTAA-Sectors)
Monthly sector rotation across 8 US SPDR sector ETFs. Backtest max drawdown: -34.5%.
Strategy & methodology
Monthly sector rotation across 8 US SPDR sector ETFs.
- Strategy type:
- Tactical asset allocation
- Rebalance frequency:
- Monthly
- Original publication:
- Not recorded. All results are backtest simulations.
- Data through:
- Backtest data through 2026-10-02.
Simulated history
Stand-in funds and until when (7)
- XLRE: VNQ before Oct 8, 2015
- XLY: FSCPX before Dec 22, 1998
- XLV: FSPHX before Dec 22, 1998
- XLU: FSUTX before Dec 22, 1998
- XLP: FDFAX before Dec 22, 1998
- XLK: FSPTX before Dec 22, 1998
- XLE: FSENX before Dec 22, 1998
Before these dates the backtest uses a stand-in, not the fund itself, so the results over those stretches show how the rules would have behaved, not what the fund returned.
Research data and disclosures
Monthly sector rotation across 8 US SPDR sector ETFs. Backtest max drawdown: -34.5%. This is a tactical asset allocation strategy. BestFolio supplies the public rule or approach and backtest context; current signals, allocations, and paid interactive data remain restricted to Pro access. Users review the published signal and place any resulting trades in their own brokerage. Displayed returns remain hypothetical and do not represent a customer's brokerage record. The facts above show how current the data is.
- BestFolio supplies
- The monthly signal email and this strategy page; current signals and email alerts require Pro access.
- Customer action
- Review the published signal and place any required trades in your own brokerage. BestFolio does not execute orders.
- Costs and exclusions
- Backtests are net of a modeled one-way transaction cost (10 bps, scaled up to 3x under stress); taxes, fund-expense drift, or market impact are not modeled. No tax, no slippage beyond the stated cost. Methodology limitations
Published result: Engine drift-until-flip-v1, data version db5b4d64, published 2026-10-01
Is Sector Rotation (Faber QTAA-Sectors) still working in 2026?
Sector Rotation (Faber QTAA-Sectors) returned 18.79% over the trailing 12 months and 45.19% over 36 months through 2026-10-02, compared with a full-backtest annualized return of 10.05%. Its full-backtest maximum drawdown was -34.48%. The full sample contains 10321 daily NAV observations from 1986-02-28. These are model results, not investor account returns or a promise. It closed at a new high on 2026-10-02, though its longest run below a previous high was 5.1 years. Recent returns do not establish that the strategy will keep working.
| Period | Return | CAGR | Max drawdown | Observations | Dates |
|---|---|---|---|---|---|
| Trailing 12 months | 18.79% | Not annualized | -7.61% | 252 | 2025-10-02 to 2026-10-02 |
| Trailing 36 months | 45.19% | Not annualized | -18.20% | 754 | 2023-10-02 to 2026-10-02 |
| Full backtest | 4768.53% | 10.05% | -34.48% | 10321 | 1986-02-28 to 2026-10-02 |
Last verified
Common questions about these results
Are these live investor returns?
No. These are the latest model NAV results from the published backtest. A recent date alone does not make a result an independently observed live record. Investor costs, taxes and execution can differ.
Why can a strategy lag for a year?
A tactical model can hold defensive assets during a rally or change positions during reversals. A short window can differ substantially from its full history. Compare cumulative returns over matching dates and inspect drawdowns as well.
How long has it spent below a previous high?
It ended the sample at a new high on 2026-10-02. The longest run below a previous high in the full backtest was 5.1 years, which is the wait a holder would have had to sit through.
Where can I check the signals behind these results?
The Signals tab on this page lists each dated model decision for the selected variant; for Pro strategies they are visible to Pro members. The methodology page explains the backtest assumptions.
Sector Rotation (Faber QTAA-Sectors) at a glance
Sector Rotation (Faber QTAA-Sectors) is a tactical asset allocation (TAA) strategy by Meb Faber, rebalanced monthly. Backtested 1986-02-28 to 2026-10-02 (40.6 years): 10.0% CAGR, 0.78 Sharpe, -34.5% max drawdown, 13.8% volatility.
- Type
- Tactical (TAA)
- Author
- Meb Faber
- Rebalancing
- Monthly
- Risk
- Moderate
- Period
- 1986-02-28 to 2026-10-02
- CAGR
- 10.0%
- Sharpe
- 0.78
- Max Drawdown
- -34.5%
- Volatility
- 13.8%
Sector Rotation (Faber QTAA-Sectors) — Tactical Asset Allocation Strategy
Monthly sector rotation across 8 US SPDR sector ETFs. Ranks each sector by 1/3/6/12-month average momentum and holds the top N (default 3). Optional 10-month SMA absolute filter routes failed sectors to cash. Deep-history backfill via Fama-French sector portfolios.
Sector Rotation (Faber QTAA-Sectors): frequently asked questions
- What is Sector Rotation (Faber QTAA-Sectors)?
- Monthly sector rotation across 8 US SPDR sector ETFs. Ranks each sector by 1/3/6/12-month average momentum and holds the top N (default 3). Optional 10-month SMA absolute filter routes failed sectors to cash. Deep-history backfill via Fama-French sector portfolios.
- Who created the Sector Rotation (Faber QTAA-Sectors) strategy?
- Sector Rotation (Faber QTAA-Sectors) was developed by Meb Faber.
- What is the historical return and maximum drawdown of Sector Rotation (Faber QTAA-Sectors)?
- Backtested from 1986-02-28 to 2026-10-02, Sector Rotation (Faber QTAA-Sectors) returned 10.0% CAGR with a -34.5% maximum drawdown and a Sharpe ratio of 0.78. Past performance does not guarantee future results.
- How often is Sector Rotation (Faber QTAA-Sectors) rebalanced?
- Sector Rotation (Faber QTAA-Sectors) is rebalanced monthly. BestFolio publishes the updated allocation signal each period.
- Is Sector Rotation (Faber QTAA-Sectors) a tactical asset allocation strategy?
- Yes. Sector Rotation (Faber QTAA-Sectors) is a tactical asset allocation (TAA) strategy: it adjusts its holdings based on market signals each period rather than holding a fixed allocation.
Backtest Performance (1986-02-28 to 2026-10-02)
| Metric | Sector Rotation (Faber QTAA-Sectors) |
|---|---|
| CAGR | 10.0% |
| Max Drawdown | -34.5% |
| Sharpe | 0.78 |
| Sortino | 1.18 |
| Volatility | 13.8% |
| Calmar | 0.29 |
| Total Return | 4722.1% |
| Backtest Period | 40.6 years |
Every rebalance fills at the signal-day close, net of modeled transaction costs. Followers trade at the next open; the delayed-close line in the Rebalance Frequency Sensitivity card shows the effect of trading one session later. Execution assumption
Strategy Details
- Type
- Tactical (TAA)
- Rebalancing
- monthly
- Risk Level
- moderate
- Variants
- 3
- Author
- Meb Faber
Categories
Further reading
New to this approach? Read what tactical asset allocation is and how it works.
Holding Sector Rotation (Faber QTAA-Sectors) alongside another strategy? Use the free portfolio overlap calculator to see how much of the two portfolios actually differs.
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