Understanding Tactical Asset Allocation Decisions

Hard Asset Allocation Tactical Asset Allocation

As a portfolio manager, Jennifer frequently employs a tactical asset allocation (TAA) strategy to respond to prevailing market conditions. Recently, she identified a potential downturn in the equities market driven by rising interest rates and geopolitical tensions. Consequently, she decided to increase her allocation to fixed income securities while reducing exposure to equities.

Which of the following statements best describes Jennifer's decision-making process in the context of tactical asset allocation?

Jennifer's decision to shift her portfolio towards fixed income is primarily a reflection of her long-term outlook on interest rates.

Jennifer is using her TAA strategy to adjust her portfolio in response to short-term market inefficiencies.

Jennifer's actions suggest a refusal to adhere to her strategic asset allocation, indicating a reactive rather than proactive investment approach.

Hint

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