Tactical Asset Allocation under Market Volatility

As the Chief Investment Officer of a mid-sized investment firm, you are tasked with reviewing the current market conditions to determine the optimal tactical asset allocation strategy. Your firm's asset allocation strategy is fundamentally driven but allows for tactical shifts in response to near-term market opportunities.

Currently, interest rates are expected to rise significantly over the next 12 months, driven by aggressive monetary policy. At the same time, the equity market has shown signs of overvaluation, leading to a bearish sentiment among analysts. Given these conditions, you examine three potential tactical asset allocation adjustments to best position the firm for the coming year.