The Role of Portfolio Monitoring in Rebalancing

At a recent quarterly review meeting, a portfolio manager reflected on the changes in the client's asset allocation and their implications for portfolio performance. The client's portfolio has a strategic asset allocation of 60% equities and 40% fixed income. Due to a significant increase in equity markets, the portfolio's allocation has drifted to 70% equities and 30% fixed income. Discuss the importance of portfolio monitoring in this context and explain how rebalancing can help maintain the intended asset allocation. Consider the objectives of portfolio monitoring and the potential impacts of not rebalancing.