ETF Sector Rotation Performance for 2025
The ETF Sector Rotation strategy delivered a strong and consistent performance throughout 2025, benefiting from disciplined, rules-based allocation decisions and the ability to rotate capital into emerging areas of market leadership. Unlike static buy-and-hold approaches, this strategy dynamically reallocates exposure each quarter, selecting the five strongest ETFs from a broader universe based on objective criteria.
With complete data now available for all four quarters, this review provides a comprehensive look at how the strategy performed across varying market environments in 2025—highlighting early-year resilience, midyear momentum, and a strong finish into year-end.
Q1 2025: Resilience Amid Volatility
The first quarter of 2025 was marked by heightened volatility and uncertainty, particularly across growth-oriented assets. Concerns around interest rates and valuation pressures weighed on major equity indices early in the year.
The Q1 portfolio included SPY, QQQ, XLF, XLU, and SLV. Entering the quarter, the portfolio value stood at approximately $72.8K and closed the quarter at $74.1K, resulting in a +1.83% portfolio return.
While SPY and QQQ experienced periods of weakness, defensive exposure through utilities (XLU) and financials (XLF), along with strong gains in silver (SLV), helped offset equity volatility. The quarter demonstrated the strategy’s ability to remain resilient during unsettled market conditions.
Q2 2025: Broad-Based Recovery
Market conditions improved significantly in the second quarter as investor sentiment strengthened and risk assets rebounded. The Q2 allocation shifted to SPY, QQQ, XLF, SLV, and GDX, reflecting growing momentum across both equities and precious metals.
The portfolio began Q2 with a value of $74.1K and ended the quarter at $82.0K, producing a +10.57% return.
Technology exposure through QQQ led gains, while SPY participated in the broader market recovery. Precious metals continued to play an important role, with both silver (SLV) and gold miners (GDX) contributing meaningfully. Financials added steady, incremental gains.
This quarter marked a clear inflection point, as the strategy transitioned from defense to offense in response to improving market breadth.
Q3 2025: Concentrated Leadership Emerges
The third quarter saw continued upside, though market leadership became increasingly concentrated. The Q3 portfolio included SPY, QQQ, XLF, EEM, and GDX, reflecting strength in emerging markets and sustained momentum in commodities.
Starting the quarter at $82.0K, the portfolio advanced to $94.6K, delivering a +15.44% return.
Gold miners (GDX) were the dominant contributor, posting outsized gains and materially increasing their weight within the portfolio by quarter-end. Emerging markets (EEM) also performed well, while SPY and QQQ continued their upward trend. Financials lagged relative to other holdings but remained positive.
This period reinforced a key characteristic of rotation strategies: performance is often driven by a small number of strong trends rather than uniform gains across all positions.
Q4 2025: Strong Finish into Year-End
The fourth quarter of 2025 capped the year with another solid advance. The portfolio rotated into SPY, QQQ, XLF, IWM, and SLV, aligning with improving equity participation and renewed momentum in commodities.
Entering Q4 with a value of $94.6K, the portfolio finished the year at $105.6K, generating an +11.60% return for the quarter.
Silver (SLV) once again stood out as the top contributor, delivering a substantial gain and highlighting the benefit of allowing winning positions to compound without rebalancing. Equity ETFs also performed well, with SPY, QQQ, and IWM participating in the broader market rally. Financials provided steady, albeit more modest, support.
2025 Summary: What the Year Revealed
Looking across all four quarters, several key insights stand out:
- Positive performance in every quarter – Despite volatility, the strategy delivered consistent portfolio-level gains throughout the year.
- Rotation, not prediction – Allocations shifted based on relative strength rather than macro forecasts.
- Diversification across asset classes mattered – Precious metals played a critical role in multiple quarters.
- Concentration drove returns – Gold and silver-related ETFs accounted for a significant share of total gains.
- Discipline paid off – The strategy avoided emotional decision-making and followed a repeatable process.
Final Thoughts
The ETF Sector Rotation strategy proved its effectiveness in 2025 by adapting to changing market leadership and capturing opportunities across equities, commodities, and international markets. Returns were not linear, but patience and adherence to the model allowed the portfolio to benefit from sustained trends as they emerged.
As markets continue to evolve, this strategy remains focused on identifying strength wherever it appears, offering investors a systematic framework for participating in leadership across asset classes. The experience of 2025 reinforces the value of a rules-based approach—one that prioritizes data, discipline, and adaptability over prediction.