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.