By Suzanne Hazlett, MBA, CIMA®, CFP®
Strategy without tactics is the slowest route to victory. Tactics without strategy are the noise before defeat. – Sun Tzu
Long-term strategy matters and will always be a spot on the horizon for investors to focus. At the same time, history can offer us a lens through which we may wish to view the future and engage in some degree of tactical navigation.
When financial markets shift, they can impact the balance of different types of assets within a portfolio. Rebalancing is clever when your investments get over-weighted in some areas and underweighted in others. For investors who choose to be more active in their portfolios and make adjustments based on a shorter-term outlook, a tactical asset allocation can be appropriate when factoring in an individual’s asset allocation policy, risk tolerance, and investment objectives.
U.S. Large Companies (Large Cap)
The S&P 500 Stock Index returned over 20% in 2023, surpassing even the most bullish expectations. Prices are trading near the top of the market’s 20-year range. Investors should temper their expectations given upcoming federal elections and expected interest rate-induced volatility.
U.S. Small Companies (Small Cap)
Small caps historically outperform large caps coming out of a recession. Small-cap stocks also historically outperformed large caps following the first Fed interest rate cut. Since small caps are trading at a discount relative to large-cap equities, investors may want to check their allocation toward the smaller market counterparts.
Ex-U.S. Companies (Developed + Emerging International Markets)
Developed market international equities are cheap relative to U.S. equities, but political headwinds could disappoint in the near term. Emerging markets remain a long-term opportunity for investors, especially with a modest weakening in the dollar and a rebound in economic growth in Asia and Latin America. Select opportunities in India and Mexico provide a foundation for growth.
Every market can present opportunities and provide valuable reminders. Periodically reassess your plan and confirm your investments align with your intended strategy. If the allocation or percentage of one more asset type is out of your intended proportion, it’s time to rebalance.
Suzanne Hazlett, MBA, CIMA®, CFP®, is a Certified Investment Management Analyst® and CERTIFIED FINANCIAL PLANNERTM professional. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Securities are offered through Raymond James Financial Services, Inc., member FINRA/SIPC. HAZLETT WEALTH MANAGEMENT, LLC is independent of Raymond James and is not a registered broker/dealer. 675 Sun Valley Road, Suite J1 + J2, Ketchum, Idaho, 83340 208.726.0605 HazlettWealthManagement.com