Analyzing Tactical Asset Allocation Adjustment

Medium Asset Allocation Tactical Asset Allocation

Alice is an investment manager for a high-net-worth individual who is concerned about the increasing volatility in the equity markets. After analyzing the market conditions, Alice believes that the fair value of equities has decreased due to rising interest rates and geopolitical tensions. She decides to adjust the portfolio's asset allocation from a long-term strategic mix of 70% equity and 30% fixed income to a tactical allocation of 50% equity and 50% fixed income for the next six to twelve months.

Alice intends to reassess the market conditions periodically to determine whether to revert to the original strategic allocation or adjust it further based on market performance. What is the primary objective of Alice's tactical asset allocation adjustment?

To maintain a consistent long-term investment strategy regardless of market conditions.

To capitalize on short-term market opportunities and reduce risk exposure.

To align the portfolio with the investor's risk tolerance and liquidity needs.

Hint

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