Aviva Investors Urges Stock Diversification as Treasury Yields Rise

Global equity fund manager Richard Saldanha is advising stock investors to diversify concentrated positions, particularly the AI trade, if the US 10-year Treasury yield hits 5%. While equity markets have delivered double-digit returns this year, Saldanha warns that a 5% yield threshold represents "pain territory" for stocks and creates a significant pressure point.

Saldanha notes that data center expansions could face increased pressure if companies rely on debt markets during periods of rising yields. To mitigate this risk, he recommends shifting investments toward healthcare, consumer staples, Japanese equities—citing increased M&A activity and buybacks in Japan—and Chinese hyperscalers.

This guidance comes amid bond market volatility and a recent initiative by the United States Department of the Treasury to buy back more debt. The government plan aims to improve market liquidity and lower yields to stabilize the financial environment.