Bond Selloff and Stock Boom Prompt Advisors to Advocate Portfolio Rebalancing

In a market landscape defined by declining bond values and near-record equity levels, financial advisors are highlighting portfolio rebalancing as a critical strategy for investors. With geopolitical tensions and inflation concerns driving global bond yields to multiyear highs, the traditional 60/40 stock-to-bond split has been disrupted, leaving many portfolios excessively weighted toward equities.

Jude Boudreaux, a certified financial planner and member of CNBC’s Financial Advisor Council, described rebalancing as one of the “least sexy” yet most valuable investment concepts available. The process involves restoring asset allocations to their target levels, effectively forcing investors to sell appreciated assets and buy those that have declined—a disciplined approach to buying low and selling high.

Stock performance has significantly outpaced historical averages in recent years. The S&P 500 recorded returns of 24% in 2023, 23% in 2024, and 16% in 2025, far exceeding the long-term average of approximately 10%. Driven by enthusiasm surrounding technology and artificial intelligence, the index remains up more than 11% in 2026, despite a slight dip from its August peak. Conversely, the bond market has suffered since the onset of the Iran war in late February. Yields on 10-year U.S. Treasury bonds reached their highest point since 2023, causing long-term bond ETFs like the iShares 7-10 Year Treasury Bond ETF (IEF) to drop over 4% year-to-date.

Cathy Curtis, another certified financial planner and council member, noted that equity gains have been broad-based, causing stocks to comprise a larger share of most portfolios than originally intended. Rebalancing allows investors to lock in these profits and reduce exposure to volatility triggered by factors such as oil prices topping $100 a barrel, rising federal deficits, and uncertainty surrounding the new Federal Reserve chair.

Advisors emphasize that rebalancing is not a signal to exit the market entirely. Kamila Elliott, co-founder of Collective Wealth Partners, clarified that the current situation does not constitute a “fire sale.” Instead, it is an opportunity to align portfolios with individual risk tolerances. For investors nearing retirement, shifting some stock gains into cash can provide liquidity for early retirement years if equity markets subsequently fall.

Elliott recommended that investors assess their risk tolerance through questionnaires available on the websites of major asset managers such as Vanguard, Fidelity, and T. Rowe Price, or via 401(k) plan administrators. She also advised considering tax implications, particularly for taxable brokerage accounts where trading can trigger capital gains. Curtis suggested that investors do not need to rebalance instantly, noting that new cash flows, withdrawals, and tax-aware trades can gradually restore the desired allocation.