Tactical Asset Allocation in Response to Economic Changes

Hard Asset Allocation Tactical Asset Allocation

As an investment manager focusing on tactical asset allocation (TAA), you aim to capitalize on short-term market inefficiencies while maintaining a longer-term strategic asset allocation. Given the current economic environment characterized by potential interest rate hikes, increasing inflation, and geopolitical uncertainties, you are tasked with formulating your asset allocation strategy for a balanced fund. Which of the following tactical asset allocation strategies is most appropriate in this context?

Increase exposure to commodities and decrease allocation to fixed income.

Maintain a fixed allocation across equities, fixed income, and alternatives regardless of market conditions.

Shift from large-cap US equities to small-cap international equities.

Hint

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