Tactical Asset Allocation Strategy Amid Economic Uncertainty

Assume you are a portfolio manager for a family office that has a long-term investment horizon but has the flexibility to implementing Tactical Asset Allocation (TAA) strategies based on short-term market conditions. The family office currently has a diversified portfolio with an asset allocation of 60% equities, 30% fixed income, and 10% alternatives.

The current economic outlook suggests rising interest rates and increased volatility in equity markets due to geopolitical tensions. Your task is to articulate a tactical asset allocation strategy for the next 12 months. Discuss how you would adjust the existing asset allocation in response to the described economic environment. Include the rationale for your selected adjustments, the anticipated risks and return implications, and how the adjustments align with the family office's overall investment objectives.