Understanding Tactical Asset Allocation

As a newly appointed portfolio manager for a mid-sized investment firm, you have been tasked with evaluating the firm's approach to asset allocation, specifically its tactical asset allocation strategies. Your firm has historically adhered to a strategic asset allocation model, but there is growing interest in implementing tactical shifts based on market conditions.

Discuss the concept of tactical asset allocation and its objectives. Additionally, identify and explain two key indicators that can inform tactical asset allocation decisions. Include in your discussion how these indicators can help in adjusting the asset mix to optimize returns while managing risk.