Let Current Market Conditions, Not Your Advisor’s Initial Allocation, Determine Your Exposure To Risk
Summary

In a market that is constantly shifting under the weight of uncertainty regarding tariffs, mistrust in economic data, an uncertain interest rate environment, and a rearranging of post-World War II geopolitical alliances, investors face a fundamental choice: stick with a fixed allocation, cross your fingers, and ride out the storms, or take a more tactical approach and actively manage risk and opportunity as conditions evolve.

At Asbury Research, we believe the answer lies somewhere in the middle. Our Tactical models — like the binary, risk on/risk off Correction Protection Model (CPM) and Asbury 6 — were designed to help investors stay invested when market internals are strong and to defensively shift into short term interest rates or cash when internals are weak.  In addition, our SEAF Model was designed to replace that portion of your portfolio that always stays invested in the market, but to only invest in those sectors that are attracting the most investor capital and avoiding the others.  We call this intelligent buy and hold.

This is the heart of tactical asset allocation: maintaining a data-driven discipline that evolves and adapts to market conditions in real-time.

The Case for Tactical Management

Risk Mitigation in Downturns

One of the primary benefits of a tactical approach is the ability to reduce exposure when the market turns hostile. By actively monitoring price trends, relative performance, and asset flows, a tactical manager can shift from equities into cash or other defensive assets during periods of elevated risk — potentially avoiding the worst part of a drawdown. This is exactly the purpose of models like CPM, which switches between Risk-On and Risk-Off based on a pre-defined set of quantitative inputs.

Correction Protection Model (CPM) Signals Since October 2023

Capturing Short-Term Opportunities

Markets don’t move in a straight line, and neither do sectors or asset classes. Tactical management provides investors with the flexibility to capitalize on short-term dislocations or leadership changes. For example, a manager might overweight an oversold sector poised for a rebound, then rotate out once the trade has played out — something our SEAF Model is specifically designed to identify by measuring the velocity of asset flows as they move around the S&P 500 sectors.

The SEAF Model through 09-18-2025

Adaptability to Economic Conditions

Unlike a static, strategic allocation, a tactical approach adjusts to changes in interest rates, inflation trends, and even geopolitical events. This adaptability can be critical when macroeconomic conditions shift quickly, as we’ve seen in recent years with rapid Fed policy changes and unexpected global shocks.

Removing Emotion from the Equation

Perhaps most importantly, tactical strategies — when driven by objective, rules-based models — completely remove fear and greed, and all the critical investing mistakes they cause, from the decision-making process. This helps investors avoid panic-selling during a decline or over-allocating near market tops, both of which are quite common and can be devastating to long-term performance.

Risks and Tradeoffs

Tactical management isn’t without challenges. Active strategies may incur higher costs due to additional trading, as well as potential tax implications for *non-qualified accounts. Timing risk is always present — getting defensive too early or re-entering too late can detract from returns. And there is no guarantee of outperformance versus a buy-and-hold strategy, particularly after fees.

This is why we stress the importance of a disciplined, repeatable data-driven process rather than ad-hoc decision-making. Tactical allocation works best when it is systematic and consistent, rather than reliant on gut feel or subjective judgment.

* A qualified investment account is a retirement savings plan that meets specific requirements set by the IRS, offering tax advantages such as tax-deductible contributions or tax-deferred growth. Common examples include employer-sponsored plans like 401(k)s and individual retirement accounts (IRAs), which allow for pre-tax contributions, tax-deferred growth, and sometimes offer tax-free withdrawals, depending on the plan type. 

The Bottom Line

Tactical asset allocation isn’t as much about market timing as it is about data-driven decision making, risk management, and flexibility. It provides investors with a framework to participate in market growth while limiting the damage from major drawdowns, the latter which can significantly reduce the time to portfolio recovery and extend the time that your retirement savings can sustain your standard of living.

Percentage Drawdowns vs. Percentage Required For Recovery

For investors who value staying engaged with the market but want to avoid “buy-and-hope” exposure, a tactical approach — ideally one powered by objective, rules-based models — can provide a more durable path to achieving long-term financial goals and to better take advantage of compounding.

Other Educational Articles By Asbury Research

Debunking Myths About Taxes and Tactical Investing

Why Managing Drawdowns Is The Key To Compounding Returns

Why We Prefer ETFs To Individual Stocks

About Asbury Research

Founded in 2005, Asbury Research is a Registered Investment Advisor (RIA) that provides data‐driven technical and quantitative investment research and managed accounts to professional and private investors.  Asbury Research has been recognized as one of the Top Five Investment Research Services Providers in 2024 by Financial Services Review.

To learn more, visit AsburyResearch.com or contact us to schedule a consultation.