Rebalancing During A Bull Market

A client texted me last week with a screenshot of his brokerage account and one line: “Is this… good?”

It was good. His account was up meaningfully from where it stood two years ago. Gold is trading near $4,580 an ounce. Bitcoin opened this week above $69,000. Silver has pushed past $67. Equity markets have been resilient despite a choppy jobs picture. On paper, a lot of portfolios look great right now.

But “good” and “still aligned with your plan” are two different questions — and the second one is the one that actually matters.

Here’s what happens quietly during a rally.

When you first built your portfolio, you probably set a target mix — say, 70% stocks, 20% bonds, 10% alternatives, or whatever split matched your risk tolerance and timeline. Nobody sits down and re-approves that mix every quarter. It just sits there, growing.

The problem is, different assets don’t grow at different rates. If equities and crypto have had a strong run while your bond allocation stayed flat, your “70/20/10” portfolio might quietly be sitting at 80/12/8 today. You didn’t make a single trade. But the portfolio you’re holding right now is not the portfolio you designed.

This is how risk creeps up on people.

Why this moment specifically matters.

Markets don’t rally in a straight line forever, and the environment right now has some real crosscurrents worth paying attention to:

• The Fed is widely expected to cut rates at its September meeting — CME futures currently price in well over a 90% probability of a quarter-point cut, following a weaker-than-expected August jobs report. Rate cuts tend to be good for growth assets in the near term, but they’re also the Fed signaling concern about a softening labor market. Good news for portfolios, mixed news for the broader economy.
• Gold and Bitcoin rallying together is historically unusual — they don’t typically move in the same direction for the same reasons. When both “risk-off” and “risk-on” assets climb at once, it’s often a sign that investors are hedging against something: inflation, currency concerns, or general uncertainty about where growth is headed next.
• Unemployment has ticked up to levels not seen since 2021, even as headline job numbers occasionally surprise to the upside. That’s the kind of mixed signal that tends to precede volatility, not calm.

None of this means a downturn is coming. It might not be. But it does mean that a portfolio that’s drifted more aggressive than intended is more exposed than you think, at exactly the moment when the picture is less certain than the headlines suggest.

The uncomfortable math of not rebalancing.

Here’s the part most people don’t intuitively grasp: rebalancing after a rally isn’t about missing out on further gains. It’s about locking some of them in.

If your equity allocation grew from 70% to 80% during a two-year run, trimming it back to target doesn’t mean you’re betting against the market — it means you’re selling high in your winning positions and buying into your underweighted ones at a relatively better price. That’s not market timing. That’s just disciplined investing.

The investors who get hurt most in a pullback are rarely the ones with a well-maintained 70/30 portfolio that dips 15%. It’s the ones who didn’t realize they’d quietly become 85/15 investors while everything felt fine.

A few questions worth sitting with this weekend:

• When’s the last time you actually checked your current allocation against your target — not your account balance, your mix?
• If gold, crypto, or a concentrated stock position has run up significantly, do you know what percentage of your total net worth it now represents?
• Are you holding gains in a taxable account that could be harvested strategically, or trimmed with tax-loss offsets elsewhere in your portfolio?
• If the market pulled back 15% tomorrow, would your current allocation still let you sleep at night — or would it reveal that you’d drifted further into risk than you meant to?

The bottom line: A strong market is exactly when portfolio discipline matters most, because it’s precisely when it feels least necessary. Nobody rebalances reluctantly during a rally — that’s what makes it easy to skip, and that’s exactly why it gets skipped by people who end up more exposed than they realize when conditions shift.

If you haven’t looked at your actual allocation — not your balance, your mix — against your original target in the last year, now is a good time. Not because something bad is imminent, but because the whole point of a target allocation is that you check it before you need it, not after.

If you would like to discuss your portfolio allocation further, click Book A Meeting.

FAQ: Rebalancing Your Portfolio During a Market Rally

1. What is portfolio rebalancing?

Portfolio rebalancing is the process of adjusting your investments back to your original target allocation — for example, 70% stocks and 30% bonds — after market movements have caused that mix to drift. Rebalancing typically involves trimming positions that have grown disproportionately large and adding to positions that have lagged, restoring the portfolio to the risk level it was originally designed for.

2. Why does my portfolio's risk level change even if I haven't made any trades?

Different asset classes grow at different rates, so a portfolio that isn't actively rebalanced will drift over time even without a single trade being made. If equities or crypto have had a strong run while bonds stayed flat, a portfolio originally built as 70% stocks and 30% bonds might quietly become 80% stocks and 20% bonds — a meaningfully more aggressive, and riskier, mix than originally intended.

3. Is it a bad idea to rebalance during a bull market?

No — in fact, a strong market is often when rebalancing matters most, precisely because it's the moment it feels least necessary. Rebalancing after a rally isn't about missing out on further gains; it's about locking in some of the gains already made by trimming an allocation that's grown larger than intended and redirecting it toward underweighted positions.

4. Does rebalancing mean selling my winning investments?

Yes, partially — but that's the point, not a downside. If an equity allocation grew from a 70% target to 80% during a rally, trimming it back to 70% means selling a portion of positions that have gained the most and buying into positions that are comparatively underweighted. This isn't market timing; it's a disciplined, mechanical way to sell relatively high and buy relatively low without trying to predict market direction.

5. How do I know if my portfolio has drifted too far from my target allocation?

The only way to know is to check your actual current allocation — the percentage breakdown across asset classes — against your original target, not simply look at your account balance. A rising balance can mask significant drift, since a portfolio can be performing well in dollar terms while simultaneously carrying more risk than originally intended.

6. Why did gold and Bitcoin rally together, and what does that signal?

Gold and Bitcoin rallying at the same time is historically unusual, since they don't typically move in the same direction for the same underlying reasons. When both a traditional "risk-off" asset like gold and a "risk-on" asset like Bitcoin climb simultaneously, it can be a sign that investors are hedging against broader uncertainty — such as inflation concerns, currency concerns, or general unease about where economic growth is heading.

7. How often should I rebalance my portfolio?

There's no single universal schedule, but the key principle is checking your allocation on a regular, disciplined basis — such as annually or after any significant market move — rather than only reacting after a downturn has already occurred. The goal is to review your target allocation before you need it, not after conditions have already shifted.

8. What questions should I ask myself to check if my portfolio still matches my risk tolerance?

A few useful questions: When did you last check your actual allocation against your target, rather than just your account balance? If a single asset — gold, crypto, or a concentrated stock position — has run up significantly, do you know what percentage of your total net worth it now represents? If the market fell 15% tomorrow, would your current allocation still feel comfortable, or would it reveal you've drifted further into risk than intended?