Sector Rotation

The Sector Rotation cluster is a one-hot encoding of GICS sector membership. Each company scores 1.0 in exactly one sector dimension and 0.0 in all others. This lets the LLM impact heads route sector-specific news to the right companies.

For example, if an article discusses rising net interest margins for US banks, the impact head will assign a positive score to the Financials dimension. Companies that score 1.0 on that dimension (banks, insurers, asset managers) will receive a tailwind; all others will receive zero contribution from this cluster.

The eight sectors

Financials covers banks, insurance companies, investment banks, and asset managers. This sector is directly tied to interest rate spreads, credit cycles, and capital markets activity.

Technology covers software, semiconductors, hardware, and internet platforms. This sector tends to be long-duration (high multiples, growth-dependent) and benefits from productivity tailwinds and AI investment cycles.

Healthcare covers pharmaceuticals, biotechnology, medical devices, and healthcare services. It tends to be defensive in economic downturns and is sensitive to drug approval news, patent cliffs, and regulatory changes.

Energy covers oil and gas producers, refiners, pipeline operators, and renewable energy companies. Revenue is tightly linked to commodity prices and is sensitive to geopolitical supply disruptions.

Real Estate covers REITs and property developers. This sector is highly sensitive to interest rates (which affect both cap rates and financing costs) and to occupancy trends in their property types.

Consumer covers both discretionary (retail, restaurants, travel) and defensive (food, beverages, household products) consumer businesses. Discretionary names are cyclical; staples are more defensive.

Industrials covers aerospace, defence, manufacturing, transportation, and logistics. This sector is sensitive to the economic cycle, capital spending cycles, and trade policy.

Utilities covers electric, gas, and water utilities. They are highly rate-sensitive (as a bond proxy) but are otherwise defensive, with regulated revenues that are largely independent of the economic cycle.