Tactical Wealth Management actively manages client investments, prioritizing proactive risk mitigation. Our tactical risk management process focuses on dynamically allocating portfolios, with allocation changes driven primarily by quantitative signals derived from time-tested relative strength price trend analysis of major asset classes, combined with a contrarian interpretation of ongoing investor sentiment data. Unlike the growing trend of relying on less liquid and less transparent alternative investments for risk management, we favor the process of employing dynamic risk budgeting to our investment portfolios.
Markets have the ability to efficiently absorb all relevant information before investors and managers can act. Continuous price discovery is a cornerstone of our quantitative process, leading us to prioritize liquid, publicly traded assets for our clients. Shifts in nominal and relative price patterns, including those across asset classes, are critical inputs shaping our tactical and strategic decisions.
For years, we’ve cautioned that retirees cannot rely on long-term fixed-income ladders for sufficient, sustainable income. Affluent investors face unique macro risks from suppressed interest rates and unprecedented monetary accommodation—often termed financial repression—which may have also helped inflate U.S. equity valuations to historic extremes. Given these conditions and the likelihood of continued political expediency, the concept of preserving purchasing power may demand a “new” investment approach, or one not needed for U.S. investors for over half a century.
A proactive risk management approach, utilizing a tactical overlay to dynamically adjust risk asset exposure across market cycles, can potentially outperform static strategies. This method may also mitigate common behavioral biases among investors, which often emerge during and after significant market fluctuations. Data consistently show these biases, known as the Investor Behavioral Gap, undermine long-term investment objectives. Our management philosophy is designed to address and minimize this gap.
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