Wells Fargo Says 5% Treasury Yields Signal Return to 60/40 Allocation as Equity Weighting Hits 1969 High

Wells Fargo strategists said the era of weak bond competitiveness is ending rapidly as the 10-year Treasury yield climbs above 5%, warning that equity allocations near historic highs face pressure. The firm's chief equity strategist, Ohsung Kwon, said current positioning "does not reflect a world with a 5% risk-free rate," arguing the stock-bond mix should move closer to a traditional 60/40 split. Investors now hold about 72% of funds in equities, the highest since 1969, according to Wells Fargo data. Kwon's analysis suggests subsequent annual S&P 500 profit expansion of roughly 7% implies about a 5% index return—roughly matching the risk-free Treasury yield and leaving zero excess return. The Fed Model similarly shows the S&P 500 earnings yield trailing the 10-year note by about 1 percentage point. Household equity exposure has reached 49% of total financial assets, a record, while Wells Fargo private clients hold 66.1% in stocks. Bank of America's latest fund manager survey showed net equity overweight slipping to 49% from 58% in late August.