Core Asset Class Allocations

  • Equities:

    Modest Overweight Overall

     

    Global equity markets are up year-to-date, as tariff risks appear manageable and earnings trends remain positive. We remain overweight equities; while there could be bouts of volatility as valuations have expanded, government policy is increasingly probusiness, central banks are accommodative, and earnings growth remains positive.

  • Fixed Income:

    Modest Underweight Overall

     

    As the Canadian economy remains challenged by U.S. policy uncertainty, the Bank of Canada (BoC) has further lowered its policy rate without committing to a specific future policy path. We believe the BoC has sufficient flexibility to respond to a wide array of economic outcomes and, as such, we expect bonds to provide diversification benefits, reduce overall portfolio volatility and preserve capital.

  • Alternatives:

    Modest Overweight Overall

     

    We believe that an allocation to alternative assets can benefit diversified portfolios especially when implemented over the longterm. Alternative assets can provide inflation protection and attractive absolute returns, while acting as long-term portfolio stabilizers via their diversification benefits and less correlated income streams. Given the nature of private asset classes as well as the present phase of value adjustment in several markets and asset classes, we believe that this may be an attractive time to increase or consider an allocation to alternative assets.

  • Cash and Equivalents:

    Modest Underweight 

     

    We are underweight cash as in a declining rate environment other asset classes should provide more attractive returns.

  • Canadian Equities

    Modest Overweight

     

  • The positive impact of BoC rate cuts and potential shifts in fiscal and business policy could provide some economic offset to the uncertainty of trade negotiations with the U.S. The S&P TSX Composite Index (TSX) potential returns are supported by the strong financial position of the Financials and Resource sectors and 2025 earnings growth expectations

  • U.S. Equities

    Modest Overweight

     

  • U.S. equities have rallied as technology spending and revenue growth remain robust. Earnings revisions have also shown improvement. U.S. equities could be further supported by "One Big Beautiful Bill" Act tax policies and the potential for further deregulation. While these benefits may be partially captured in valuations, equities continue to be supported by earnings growth.

  • International Equities

    Modest Underweight

     

  • International equities have rallied year-to-date as multiples rebounded from low levels and Germany announced a major fiscal stimulus plan. That said, at this point there appears to be less scope for further multiple expansion given earnings trends. Japanese equities look attractive on a relative basis with momentum building behind corporate reform but there may be volatility as the Bank of Japan may look to continue raising rates.

  • Emerging Markets

    Modest Underweight

     

  • Emerging Markets (EM) central banks, such as Mexico, South Korea, and China have cut rates this year. China continues to struggle with challenges in its property sector but has announced policies that could provide some stabilization for its economy.

  • Domestic Government Bonds

    Neutral

     

  • The BoC has the flexibility to adopt an accommodative policy stance to provide support to the economy if conditions deteriorate further. This would result in a steepening of the yield curve as shorter rates would likely fall faster than longer rates.

  • Investment Grade Corporate Credit

    Modest Overweight

     

  • Credit spreads remain tight as all-in yields drive strong investor demand. Corporate credit fundamentals should be resilient to any near-term economic volatility. With risk premiums fairly flat across the yield curve, we continue to favour short to mid-term corporate bonds over longer term bonds.

  • Global Bonds-Developed Markets

    Neutral

     

  • We believe that U.S. policy uncertainty will manifest differently across countries with respect to growth and inflation expectations. Therefore, opportunities across developed market bonds will likely vary substantially.

  • Global Bonds-Emerging Markets

    Modest Underweight

     

  • While emerging markets (EM) are benefiting from a broad-based decline in the U.S. dollar (USD), valuations of USD-denominated EM bonds are screening rich compared to developed market corporate bonds. However, there continue to be opportunities to earn high levels of income in select local currency EM markets.

  • High Yield Credit

    Neutral

     

  • High yield bonds have fully recovered from trade-policy related volatility and spreads are now close to the tightest levels of the last five years. Nonetheless, credit quality remains robust and should combine with a benign lending backdrop to keep corporate defaults low. Uncertainty around trade policy and economic growth could cause spreads to widen, but we expect this to be offset by attractive all-in yields.

  • Commercial Mortgages

    Neutral

     

  • Commercial mortgages continue to provide accretive income while insulating investor returns from the increased volatility in interest rates.

  • Private Debt (Universe)

    Modest Underweight

     

  • 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.

  • Domestic Real Estate

    Neutral

     

  • We believe most value adjustments in Canadian commercial real estate are complete. Office occupancy (especially in Toronto) should improve by 2026 as large users mandate returns to work. Despite U.S. tariff policy volatility, Canada's industrial market remains healthy. Poor condo markets and lower immigration have temporarily pressured residential rental rates in Toronto and Vancouver due to housing shortages.

  • Global Real Estate

    Neutral

     

  • 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 recissions are also early indicators of the improved sentiment for continued recovery.

  • Infrastructure

    Modest Overweight

     

  • 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.

  • Commodities (Gold, Energy, metals, agriculture)

    Modest Underweight

     

  • Gold continues to benefit from demand from central banks and investors as they seek a safe-haven in uncertain times. Despite the economic uncertainty, metals prices have held-in YTD as markets are currently balanced. Oil has weakened as OPEC+ looks to slowly return supply, but also to manage member commitments and might adjust as market conditions warrant.

  • U.S. Dollar (USD) vs.
    Canadian Dollar (CAD)

    Modest Underweight

     

  • The USD has declined YTD, and based on our long-term valuation metrics, remains overvalued. Current U.S. policy has led to uncertainty in trade and fiscal deficits. While this has increased the attractiveness of other developed market currencies for diversification, the momentum of USD weakness versus the CAD may moderate near term due to Canada's weaker growth fundamentals.

 

Chair

David Sykes, CFA

Senior Vice President and Chief Investment Officer, TD Asset Management Inc.

TDAM Asset Allocation

TDAM Equities

TDAM Fixed Income

TDAM Alternatives

  • Colin-Lynch

    Managing Director, Head of Alternative Investments, TDAM

  • Bruce Mackinnon

    Managing Director, Head of Private Debt Research & Origination, TDAM

Epoch

Council Non-Voting Members

  • Brad Simpson

    Chief Wealth Strategist, TD Wealth

  • Sid Vaidya

    U.S. Wealth Investment Strategist, TD Wealth

  • Bryan Lee

    Vice President & Director, Lead of the Retail Client Portfolio Management Team, TDAM

  • Jafer Naqvi

    Managing Director, Head of Client Portfolio Management, TD Asset Management Inc.

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