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Views as of July 2, 2026
Market & Portfolio Highlights
- Market Trends: Resilient growth, strong labour markets, and solid fundamentals are anchoring the macro backdrop
- Asset Class Views: Equities continue to benefit from positive earnings momentum and technology‑led growth, while fixed income offers attractive income at higher yields and private markets provide diversification through stable, less correlated return streams
- Key Takeaway: A constructive outlook is underpinned by earnings growth, elevated yields, and the increasing importance of diversification across asset classes to help navigate volatility
Market Commentary
Views Provided by the TDAM Client Portfolio Management team
Global markets remain resilient, led by strong equity performance driven by AI-related earnings growth. U.S. equities and select technology-linked markets continue to outperform, while market concentration has increased. Bond yields remain elevated, while credit spreads are tight, reflecting solid corporate fundamentals. Economic conditions are mixed, with continued resilience in the U.S. alongside softer momentum in Canada and Europe, and export-led growth in China. Commodity trends are uneven, and the U.S. dollar has strengthened amid growth differentials. Overall, the outlook remains constructive with market performance dependent on earnings momentum and stable financial conditions.
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Equities
- Earnings surprises measure the difference between reported corporate earnings and analyst expectations, indicating whether companies beat or missed forecasts
- First quarter results show broadly positive surprises across markets, with the S&P 500 Index and S&P/TSX Composite Index strong across sectors
- Overall earnings momentum remains healthy, suggesting corporate fundamentals are solid and providing a supportive backdrop for markets
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Fixed Income
- Higher government bond yields have improved all-in income opportunities in Canadian investment grade credit
- Canadian government bonds continue to see buyers step in at 10-year yields around 3.6% to 3.8%
- Strong credit fundamentals paired with a volatile backdrop favour selective exposure with a focus on quality
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Private Markets
- Direct real estate presents a compelling entry point with capitalization rates (expected return) at 15-year highs and starting to stabilize
- Private infrastructure offers strong inflation protection while benefiting from elevated oil prices
- Noise around private credit strategies are insulated with minimal risk of broad-based contagion
- Private market strategies continue to deliver uncorrelated and low volatility return profiles for investor portfolios
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Asset Allocation
- CUSMA enters a July review; while a 16-year extension is unlikely, it should hold to 2036 with annual negotiations. Canada remains relatively well-positioned with resilient, diversifying trade
- Exports to the U.S. declined materially in 2025. Trade with non-US markets have offset much of the weakness, reinforcing a structural shift to broader trade relations
- Portfolio implication: Supports a constructive view on Canadian equities, especially global sectors, while reinforcing diversification and active positioning amid policy-driven volatility
TD Wealth Asset Allocation Committee Strategic Portfolio Positioning
The following outlines the current views over a 12–18 month horizon.
- Equities remain supported by solid earnings growth: Pro-business policy tailwinds and AI-drive sectors are keeping the outlook constructive despite potential volatility from geopolitical developments and shifting sentiments
- Elevated yields with ongoing volatility: A "higher-for-longer" rate backdrop and resilient growth are keeping yields attractive, but policy uncertainty and inflation risks are expected to sustain rate volatility across bond markets
- Shifting away from cash: With cash expected to offer relatively limited forward returns, the WAAC continues to favour equities, credit, and alternative assets for stronger long-term return potential and diversification benefits
Core Asset Class Allocations
Asset Class Views and Outlook
Canadian economic growth is expected to remain low, but positive, as a more pro- investment federal government helps offset uncertainty around U.S. trade negotiations. The S&P TSX Composite Index (TSX) sector mix acts as a diversifier for U.S., & Emerging Markets that are heavily influenced by the Information Technology sector. TSX returns are supported by strong earnings growth combined with shareholder friendly dividend and buyback policies.
U.S. equity returns are driven by earnings growth, particularly in Information Technology and sectors that benefit from AI spending. Tax policies under the "One Big Beautiful Bill Act," lagging impact of past Fed cuts, and the potential for further deregulation offer additional tailwinds. Key headwinds include concerns around AI driven disintermediation in the Information Technology Software & Services sector and ongoing geopolitical uncertainty.
International equities may lag as earnings growth, while positive, remains lower than in other markets. European earnings could face additional headwinds if energy costs remain above pre-conflict levels. The Japanese market has rallied on the back of corporate reform, a more pro-growth government, and benefits from AI spending, but there may be volatility as the Bank of Japan has raised rates.
Emerging Markets provide exposure to attractively valued technology companies with strong earnings growth potential. China continues to face challenges with weak domestic consumption and its property market.
Canadian rates have outperformed recently on weaker data but continue to be driven by global “higher-for-longer bond yields” dynamics. That said, with the front-end of the yield curve anchored by a patient BoC, the long-end of the yield curve could rise as global policy uncertainty persists.
Spreads remain near cycle tights amid solid fundamentals, but elevated issuance driven by AI-related capex and M&A is creating a supply overhang. We continue to favour short- to mid-term corporate bonds where incremental yield remains attractive without adding duration risk.
Strong U.S. data point to a "higher growth and higher inflation” economic backdrop, keeping global yields elevated. Monetary policy uncertainty around policy rate hikes from major central banks like the ECB and BoJ, coupled with an unknown reaction function from the U.S. Federal Reserve, as investors await task force recommendations, are expected to keep global bond markets volatile over the next 6-12 months.
Emerging market local currency government bonds offer attractive income, however, total return prospects vary by region. We favour short-maturity bonds or currency positions in select Latin American, eastern European and African countries, where inflation-adjusted yields are attractive. In contrast, we remain cautious on Asian countries where yields are lower and external risks are elevated.
Fundamentals remain supportive and defaults low, but spreads near cycle tights provide limited compensation for downside risks tied to geopolitics, private credit dynamics, and broader market volatility. We remain neutral given tight valuations.
Commercial mortgages continue to provide accretive income while insulating investor returns from the increased volatility in interest rates.
We believe most value adjustments in Canadian commercial real estate are complete. Office occupancy (especially in Toronto) has begun to improve as large users mandate returns to office. Despite U.S. tariff policy volatility, Canada's industrial market remains healthy. Poor condominium markets and lower immigration have temporarily pressured residential rental rates in Toronto and Vancouver. Long-term multi-unit residentials will likely see strong rental growth due to structural supply-demand imbalance.
Returns are starting to improve globally. U.S. and Asian Pacific markets have seen the capitalization rate stabilizing, while Europe continues to outperform. New capital raising and significant redemption rescissions are also early indicators of the improved sentiment for continued recovery.
Infrastructure continues to offer stable returns and lower volatility due to its essential long-term nature. The persistent global infrastructure spending gap remains a key investment driver, reinforcing the need for increased investment. Additionally, accelerating trends such as the electrification of industry and the expansion of digital infrastructure are significantly increasing demand for power generation assets, creating compelling investment opportunities.
Global Private Credit provides premium income through diversified global origination across corporate, real estate, infrastructure, and specialty finance, including middle‑market corporate relationships. TDAM’s robust credit risk infrastructure supports strong governance and disciplined access to attractive risk‑adjusted return opportunities.
High credit quality and global diversification provides an income ballast in an uncertain economic environment. Incremental income and potential capital appreciation from interest rate moderation provide upside.
Commodities have strengthened amid supply disruptions, particularly in energy, natural gas, and select industrial inputs. Recent gains appear driven more by curtailed supply than excess demand, reinforcing commodities’ role as a portfolio diversifier during periods of geopolitical stress.
Longer-term valuation metrics suggest the USD remains overvalued, supporting a modest underweight positioning. While the USD continues to benefit from safe-haven demand amid ongoing geopolitical uncertainty, upside versus the CAD may be more limited from current levels. Canada’s softer growth outlook and sensitivity to global trade dynamics continue to act as near-term headwinds for the CAD, partially offset by support from elevated energy prices. Overall, we view the CAD as broadly fair valued, with relative currency movements likely to be driven by shifts in global risk sentiment and commodity dynamics.
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