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.
For more information on LPL Research’s tactical views LPL Advisors may refer to the Global Portfolio Strategy (GPS) report on Resource Center.
Important Disclosures
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk.
Indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
This material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.
Asset Class Disclosures –
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
Bonds are subject to market and interest rate risk if sold prior to maturity.
Municipal bonds are subject and market and interest rate risk and potentially capital gains tax if sold prior to maturity. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply.
Preferred stock dividends are paid at the discretion of the issuing company. Preferred stocks are subject to interest rate and credit risk. They may be subject to a call features.
Alternative investments may not be suitable for all investors and involve special risks such as leveraging the investment, potential adverse market forces, regulatory changes and potentially illiquidity. The strategies employed in the management of alternative investments may accelerate the velocity of potential losses.
Mortgage backed securities are subject to credit, default, prepayment, extension, market and interest rate risk.
High yield/junk bonds (grade BB or below) are below investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.
Precious metal investing involves greater fluctuation and potential for losses.
The fast price swings of commodities will result in significant volatility in an investor's holdings.
This research material has been prepared by LPL Financial LLC.
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