What is one of the characteristics of tactical asset allocation?

Tactical asset allocation is characterized by its dynamic nature, wherein investors make short-term adjustments to their asset allocation in response to market conditions or macroeconomic trends. This approach stands in contrast to static methods, as tactical allocation seeks to exploit perceived inefficiencies or shifts in the market environment.

Reliance on macroeconomic forecasts is fundamental to tactical asset allocation. By analyzing economic indicators, market trends, and global events, investors aim to optimize their portfolios by increasing or decreasing exposure to various asset classes like equities, fixed income, or alternatives based on their outlook. This approach requires ongoing analysis and is often more reactive compared to static strategies, which do not typically incorporate ongoing adjustments based on external economic factors. Therefore, the emphasis on macroeconomic forecasts is what distinguishes tactical asset allocation from other types of investment strategies.