Dynamic Asset Allocation in Global Context

Global asset allocation involves the strategic allocation of assets across various geographical regions to optimize risk and return according to an investor's objectives. It integrates various economic indicators and market conditions that may influence asset prices differently around the globe.

Consider an investor with a well-diversified portfolio consisting of equity and fixed income securities across multiple regions. They are analyzing a new model that suggests adjusting the portfolio’s exposure based on changes in the International Monetary Fund (IMF) global economic growth forecasts, which may affect currency values and, consequently, asset valuations. In this context, the investor is exploring the efficiency of maintaining fixed weight allocations versus dynamic adjustments based on global macroeconomic indicators.

Given the current economic landscape and the expected shifts in fiscal policies across developed and emerging markets, which of the following asset allocation approaches is likely to enhance portfolio performance while managing exposure to currency risk?