What primarily drives the adjustments in tactical asset allocation?

Adjustments in tactical asset allocation are primarily driven by short-term market predictions. This approach involves making temporary changes to an investment portfolio’s asset allocation in order to take advantage of expected market movements over a relatively short time period. Tactical asset allocation is more flexible and reactive compared to strategic asset allocation, which is based on long-term investment goals and asset mix.

Short-term market predictions can be influenced by various factors, including current economic news, market sentiment, price trends, and event-driven scenarios. Investors may adjust their allocation between asset classes based on anticipated market movements, seeking to capitalize on temporary inefficiencies or trends observed in the market.

While other factors like long-term market trends, future inflation expectations, and regulatory changes can influence overall investment strategies, they do not drive tactical asset allocation in the same immediate and reactive way. Therefore, the focus on short-term market predictions is what primarily characterizes tactical asset allocation adjustments.