Sector rotation is an investment strategy that involves shifting investments among different sectors of the economy based on their performance and economic cycles. Investors typically move funds into sectors that are expected to outperform during specific phases of the economic cycle, such as technology during growth periods or utilities during downturns. This approach aims to maximize returns by capitalizing on the strengths of various sectors at different times. By analyzing economic indicators and market trends, investors can make informed decisions about when to enter or exit specific sectors, thereby enhancing their overall portfolio performance.