Rising bond yields are forcing a reset in stock allocations, according to Wells Fargo strategists. Equity holdings sit at 72% of investor portfolios, the highest since 1969, as double-digit earnings growth has overshadowed weak bond coupons. With 10-year Treasury yields surpassing 5%, strategists argue the current allocation is unsustainable.

Ohsung Kwon, chief equity strategist at Wells Fargo, calls for a shift toward a traditional 60%/40% equity-bond split. The Fed model shows the S&P 500’s earnings yield is roughly 1 percentage point below Treasury yields, reducing the equity risk premium. Bank of America Corp. data reveals investor equity overweight has dropped to 49% from 58% in August.

Anya Shelekhin, an investment strategist at Bank of America, recommends going long bonds as yields peak. US household equity holdings now represent 49% of financial assets, up from 21% in 2008. Marta Norton, chief investment strategist at Empower, notes the prolonged bull market has driven excessive equity exposure, but rising yields will challenge future earnings growth.