Global macro investing and tactical asset allocation have a lot it common. They are both trying to be in the best asset classes at the right times. In fact some practitioners can fit into both categories.
Tactical asset allocation is a dynamic asset allocation process that essentially tries to allocate capital to where the best potential future returns are. For instance if you have a 25% allocation to US stocks and they are at 12 year lows with the lowest PE ratio in over a decade you would likely believe that now is a good time to be putting more money to work there. A tactical asset allocator would then sell off a percentage of other asset classes in order to put more money at work in US stocks.
As you can see this is a lot like a global macro investor. Global macro is when you are looking at every investable asset class and trying to decide where are the best risk to reward opportunities.
One of the primary differences between global macro and tactical asset allocation is that most asset allocators will always be at least partially invested in each of their pre-selected asset classes. That differs from the global macro investor who will only go where they see a great opportunity now, and not 5 years later.
Essentially tactical asset allocation brings together global macro as well as traditional asset allocation in order to try and achieve market like or better returns with below market volatility. In fact over time one of the number one things that tactical asset allocation has done is to reduce risk. And as traders the world over know, reduction of risk can do wonders for your long term results.
As global macro investors we can profit from research done by tactical asset allocators because we can build the same models to help us determine where the best opportunities are and how they compare to other markets.
Asset allocation while flawed as a stand alone strategy fits in well with the tactics of global macro trading in concept. After all global macro uses all of the liquid asset classes already. The better that you are able to find which ones will outperform and which ones will underperform the better you will be able to get higher returns with lower risk. - 15224
Tactical asset allocation is a dynamic asset allocation process that essentially tries to allocate capital to where the best potential future returns are. For instance if you have a 25% allocation to US stocks and they are at 12 year lows with the lowest PE ratio in over a decade you would likely believe that now is a good time to be putting more money to work there. A tactical asset allocator would then sell off a percentage of other asset classes in order to put more money at work in US stocks.
As you can see this is a lot like a global macro investor. Global macro is when you are looking at every investable asset class and trying to decide where are the best risk to reward opportunities.
One of the primary differences between global macro and tactical asset allocation is that most asset allocators will always be at least partially invested in each of their pre-selected asset classes. That differs from the global macro investor who will only go where they see a great opportunity now, and not 5 years later.
Essentially tactical asset allocation brings together global macro as well as traditional asset allocation in order to try and achieve market like or better returns with below market volatility. In fact over time one of the number one things that tactical asset allocation has done is to reduce risk. And as traders the world over know, reduction of risk can do wonders for your long term results.
As global macro investors we can profit from research done by tactical asset allocators because we can build the same models to help us determine where the best opportunities are and how they compare to other markets.
Asset allocation while flawed as a stand alone strategy fits in well with the tactics of global macro trading in concept. After all global macro uses all of the liquid asset classes already. The better that you are able to find which ones will outperform and which ones will underperform the better you will be able to get higher returns with lower risk. - 15224
About the Author:
Dagny helps investors find great Global Macro Trading opportunities. Tactical Asset Allocation is one of the many concepts that TheMacroTrader.com uses to find great investment opportunities.
