Tactical Asset Allocation Positioning Insights
George Smith | Portfolio Strategist
Last Updated: September 02, 2025
As we reach the end of summer and head into fall, we examine LPL Research’s current tactical views as expressed in our Tactical Asset Allocation (TAA). Our Growth with Income (GWI) portfolio, which tracks most closely the traditional 60/40 stocks/bonds portfolio, is shown below, and compared to our GWI Diversified benchmark.
LPL Research Growth with Income (GWI) Tactical Asset Allocation (TAA)
Source: LPL Research 08/29/25
Disclosure: Indexes are unmanaged and cannot be invested into directly. All performance referenced is historical and is no guarantee of future results.
Equities vs Fixed Income: Tactically Neutral
LPL Research’s Strategic and Tactical Asset Allocation Committee (STAAC) maintains our tactical neutral stance on equities, reflecting a balanced view amid elevated valuations, seasonal headwinds, and ongoing macro uncertainty. With a fair dose of optimism already priced into markets—particularly around AI, earnings strength, and easing trade tensions—the STAAC advises against increasing portfolio risk beyond benchmark targets at this time. Instead, the Committee continues to monitor trade negotiations, inflation trends, economic data, and technical indicators to identify more attractive entry points for adding to equity exposure on weakness. Any increase to equity allocations would be funded from either a reduction in fixed income allocations, currently neutral, or alternative investments, currently overweight.
Equities: Domestically Growth and Large-Cap Tilt
Within style and size domestically, the STAAC continues to favor growth over value and large caps over small caps. Our underweight vs benchmarks domestically is concentrated in small-cap value equities with the largest overweight being large-cap growth equities. Stronger balance sheets and superior earnings power in a slowing economy support this preference.
From a geographic perspective the STAAC’s view is more neutral, remaining aligned with our benchmarks across the U.S., developed international, and emerging markets. While U.S. equities may benefit from continued AI investment and fiscal stimulus in 2026, non-U.S. markets could potentially see upside from further dollar weakness.
While not represented directly in the GWI TAA, sector-wise the STAAC maintains a constructive view on communication services and financials, supported by robust fundamentals, manageable tariff exposure, and favorable policy dynamics. Meanwhile, cyclical sectors like industrials are also in focus due to capital investment tailwinds from the “One Big Beautiful Bill Act.”
Fixed Income: Favoring Quality Amid Volatility
In fixed income, the STAAC holds a neutral weight to core bonds, with a slight preference for mortgage-backed securities (MBS) over investment-grade corporates. The Committee believes the risk-reward profile favors high-quality sectors such as Treasuries, agency MBS, and IG corporates, while remaining cautious on adding duration given current rate volatility and mixed economic signals.
Alternatives: Diversification for an Uncertain Macro Backdrop
The STAAC remains positive on alternative investments, viewing them as valuable tools for portfolio diversification and downside protection in a volatile macro environment, with an overweight allocation in the TAA funded by an underweight to cash. Alternative strategies such as managed futures, discretionary global macro, and multi-strategy funds are favored for their flexibility and ability to navigate shifting policy and economic conditions. With the potential for dispersion and/or volatility to rise, alternatives remain a key component of STAAC’s tactical playbook.
Final Thoughts
Overall, STAAC’s positioning reflects a disciplined and risk-aware approach. With markets digesting mixed signals—from resilient earnings and AI-driven growth to trade uncertainty and inflation stickiness - the Committee is focused on maintaining flexibility and balance. While near-term caution is warranted, STAAC stands ready to act should volatility create compelling opportunities to lean into risk assets.