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Tactical Allocation Ideas

Tactical Allocation Ideas

| November 23, 2022

Tactical Allocation Ideas as of Nov. 23, 2022

For those clients who like to allocate based on short-term market situations here are some short-term tactical moves to consider:  U.S. markets have historically rally during periods of divided government after mid-term elections. We have already seen a considerable increase over the past month in the US Large Cap Stock Indexes. As a result, you may want to lower your overall stock market exposure. There are signs of a weakening outlook for growth and earnings. One of the firms I follow believes that the probability of recession in the US has risen to 60%. The October ISM Manufacturing index was at its lowest levels since May 2020 showing the Feds aggressive rate hikes are starting to work.  Money markets offers safety and more attractive total return if rates continue to rise in the short-term.  High yield bonds, assuming their fundamentals still remain supportive, have yields that offer a more reasonable compensation for the risks as compared to investment grade bonds.  Below are my observations on short-term market conditions. "Less Attractive" does not mean get out of those assets classes completely, it just means lower some of your exposure in those asset classes.  "More Attractive" does not mean solely invest in those assets classes, it just means increase your exposure in those asset classes.

Less Attractive

  • Large Cap (US)
  • Core Investment Grade Bonds (US and International) 

More Attractive

  • Hedge Strategies
  • Cash
  • Treasury
  • High Yield Bonds
  • Floating Rate Loans
  • Small Cap US Stock 
  • International Stock
  • Emerging Markets Stock