Global Integration in Asset Allocation Strategies

As global markets become increasingly interconnected, investors face unique challenges and opportunities in their asset allocation strategies. Consider a hypothetical client, Sarah, a 45-year-old professional with a household income of $150,000 and net worth of $1.5 million. She seeks to invest in both domestic and international markets to achieve long-term capital growth while maintaining a moderate level of risk.

Discuss the factors that should influence Sarah's asset allocation decision, specifically in the context of global integration. Include an analysis of how various macroeconomic factors, geopolitical events, and market correlations can affect her portfolio. Additionally, provide recommendations for constructing a diversified portfolio that includes both domestic and foreign assets, taking into account potential currency risk and market efficiency.