Investing.com -- UBS said in a note to clients on Monday that investors should use the current equity market strength to rebalance portfolios, warning that outsized gains in top U.S. technology stocks have created concentration risks that leave many investors vulnerable to a shift in market leadership.

The S&P 500 climbed to a fresh record high Friday, taking year-to-date gains above 10%, helped by reports the U.S. and Iran were nearing a framework agreement to reopen the Strait of Hormuz.

The MSCI All Country World index is up 10.9% for the year. UBS maintained its year-end S&P 500 target of 7,900, with 20% earnings-per-share growth as the primary support.

Despite the constructive view, UBS believes the next phase of market gains is likely to be characterized by broader leadership beyond mega-caps, greater rotation and more frequent volatility as capital is reallocated.

The bank recommended diversifying into Japan, China, emerging markets, Switzerland, global health care and European consumer discretionary, while also noting that AI's impact is expanding into infrastructure, power and industrial supply chains, beyond the companies that have driven the rally so far.

UBS added that "the recent bond sell-off has created an opportunity to lock in attractive yields," flagging high-quality short- to medium-maturity government bonds as particularly appealing. The bank said market pricing for central bank policy has moved too far in a hawkish direction for most major economies.

On the technology outlook specifically, UBS cautioned, "it remains unclear which companies will emerge as leaders in monetizing AI," leaving portfolios exposed to potential disappointment and volatility even after a strong earnings season.