Financial advisors are recommending investors rebalance their portfolios, suggesting a shift from stocks to bonds. This advice comes as global bonds have been selling off, while stocks are near all-time highs following significant growth over the past three years. For instance, the S&P 500 has seen returns of 24% in 2023, 23% in 2024, and 16% in 2025, and is up more than 11% in 2026, leading to many portfolios becoming stock-heavy and potentially riskier than intended.
Bonds have experienced a broad sell-off since the Iran war began at the end of February, with yields on government bonds climbing to multiyear highs. The yield on 10-year U.S. Treasury bonds hit its highest level since 2023. As a result, investment funds tracking long-term bonds have fallen in value; for example, the iShares 7-10 Year Treasury Bond ETF (IEF) is down over 4% this year, and the Fidelity Long-Term Treasury Bond Index Fund (FNBGX) is down over 5%. Despite these declines, advisors see this as an opportunity to buy bonds at a discount, similar to "buying the dip" in stocks.
Rebalancing helps investors return to their target asset allocation, such as the classic 60% stocks and 40% bonds. It also allows investors to lock in profits from winning investments (stocks) by moving those gains to another part of their portfolio (bonds). This strategy helps manage risk, particularly with geopolitical uncertainties like the Iran war and inflation concerns driving oil prices above $100 a barrel. Advisors emphasize that rebalancing is not about selling all equities but rather realigning with one's risk tolerance. New cash flows, withdrawals, and tax-aware trades can also be used to gradually move a portfolio back to its desired allocation.
