Understanding Tactical Asset Allocation for Client Portfolios

Imagine you are a portfolio manager at a wealth management firm overseeing a client with a moderately aggressive investment profile.

The client has expressed interest in understanding how tactical asset allocation (TAA) can be utilized to enhance investment returns while managing risk. Your firm allows for adjustments to the asset allocation based on short-term market forecasts and economic indicators.

In your response, discuss the principles of tactical asset allocation, including its objectives, potential benefits, and risks. Additionally, explain how you would implement a TAA strategy for this client, including specific asset classes you would overweight or underweight based on current market conditions.