How Does Trend Following Tactical Asset Allocation Strategy Deliver Returns

We often received emails from our users about our strategies. The following is a question asked recently by one of our users: 

Hello, A question I have is in regards to tactical allocation portfolios;   your market outlook continues (and I agree) that future returns in the market are estimated to be between 3-5% based on historical norms, etc.     It is hard to estimate how the different portfolios (especially tactical) would invest and respond in this environment since this would be different market returns that we have seen over the past 10-15 years (which are most of the model portfolios are based on).     Any guidance how to evaluate the different portfolios with these type of returns if that is what we might be looking at down the road?   Thanks

We believe this is a very important question and it should be in many users’ mind. It is much easier to answer this question for Strategic Asset Allocation (SAA) based portfolios as we believe that for a relatively long period of time such as 10 years or longer, returns of stocks and most other assets are much easier to predict. Since an SAA portfolio does not tend to change the asset mix much, it is thus simpler to derive the overall portfolio return.