Many investor portfolios now carry more market risk than owners intended, after an extended run of strong equity returns and a recent drop in long-duration bond prices, advisers say. The immediate consequence is that allocations chosen to match a person’s tolerance and horizon have shifted, leaving some investors exposed to a bigger equity bite than they planned.
Rebalancing restores a chosen mix of stocks and bonds, for example a 60%/40% split, by trimming positions that have grown and topping up those that have lagged. That process is designed to bring a portfolio’s risk profile back in line with the investor’s stated objectives rather than relying on ad hoc market calls.
Equities have driven the drift. The S&P 500 returned 24% in 2023, 23% in 2024 and 16% in 2025, and remained more than 11% higher so far in 2026 despite a modest pullback from an August peak. At the same time, global government bond yields have risen to multiyear highs amid inflation and sovereign-debt concerns, and the yield on the 10-year U.S. Treasury reached its highest level since 2023. Higher yields have pushed down long-duration bond prices: as of Wednesday afternoon the iShares 7-10 Year Treasury Bond ETF, IEF, was down more than 4% year to date excluding dividends, and the Fidelity Long-Term Treasury Bond Index Fund, FNBGX, had fallen more than 5%.
Advisers say those market moves have probably left many portfolios overweight equities. Cathy Curtis warned that equity exposure has expanded beyond tech-heavy strategies, saying, "No doubt, equities have become a larger part of most portfolios and not just those that are technology-heavy." Jude Boudreaux called rebalancing "a disciplined way to buy low and sell high, which historically is the fundamental idea of what to do in [financial] markets." Kamila Elliott cautioned against overreacting to gains, noting, "When the market is up, people forget it can go down."
Beyond resetting nominal weights, rebalancing locks some profits from a long equity run and creates opportunity to add fixed income at lower price levels. Practically, investors can confirm an appropriate mix with risk-tolerance questionnaires provided by major asset managers such as Vanguard Group, Fidelity Investments and T. Rowe Price, or through their 401(k) administrator. Advisers also remind clients that trades in taxable accounts can generate capital gains, so many will prefer a staged approach to reduce tax impact.
For now, the recommended next step is procedural: compare current holdings to stated targets, and where allocations have drifted materially, sell portions that have run up and buy into assets that have lagged. That approach aims to preserve gains, restore the portfolio’s intended risk posture and remove emotional timing from investment decisions as geopolitical and monetary uncertainties play out.
