Market Updates & Outlook
September 09 2026

Monthly Portfolio Outlook

10 min

Market & Portfolio Highlights

    • Market Trends: Global growth and corporate fundamentals remain supportive, underpinned by expanding Purchasing Manager's Index (PMI) data, resilient economic activity, improving earnings revisions, and accommodative financial conditions
    • Asset Class Views: Equities continue to be supported by earnings growth and broadening market participation, while fixed income continues to offer attractive yields and selective duration opportunities. Private markets remain constructive, backed by improving real estate fundamentals and stable long -term return potential
    • Key Takeaway: While artificial intelligence (AI) related investment remains a powerful market theme, investors may want to stay focused on portfolio balance and risk management as leadership continues to evolve across regions and sectors

    Views Provided by the TDAM Client Portfolio Management team

    Equities

    S&P 500 Index versus S&P 500 Equal Weight Index

      Source: Bloomberg Finance L.P. As at August 24, 2026. 
       

      • Market leadership broadened in 2026, with gains becoming more evenly distributed across sectors and companies after years of mega-cap technology dominance, benefiting the S&P 500 Equal Weight Index
      • Improved market breadth suggests a larger share of stocks are participating in the advance, reducing reliance on a small group of mega-cap names
      • The Equal Weight Index's outperformance reflects reduced technology concentration and greater exposure to value and cyclical sectors

      Fixed Income

      Long-Term Yields are Testing Multi-Decade Highs

      Source: Bloomberg Finance L.P. As at August 21, 2026.
       

      • High long-term bond yields have prompted U.S. treasury market intervention, underscoring the attractiveness of current bond yields for investors
      • AI hyperscaler corporate debt issuance is introducing new opportunities and risks in the corporate bond market, reinforcing the importance of strong security selection
      • Renewed tariffs are weighing on Canada's already subdued growth outlook, where bonds may provide support if growth slows

      Private Markets

      Leasing Momentum Continues with Limited New Supply

      Source: TD Asset Management Inc. As of June 30, 2026.
       

      • Improving leasing activity across high quality office buildings should deliver enhanced income growth for commercial real estate investors
      • Regardless of trade deal outcomes, the essential nature of infrastructure projects and the widening government spending gap should drive attractive returns with the asset class
      • Private credit strategies continue to complement public fixed income portfolios to potentially improve total return outcomes

        Asset Allocation

        FTSE Canada Universe Bond Yield versus Inflation and Yield to Maturity

        Source: TD Asset Management Inc., FTSE Global Debt Capital Markets Inc., Bloomberg Finance L.P. As at July 31, 2026.
         

        • Structural factors, not just monetary policy, are keeping global bond yields elevated, as larger fiscal deficits, higher term premiums, and stronger capital demand push long-term rates higher
        • Higher bond yields raise the hurdle for equities by offering more attractive returns and increasing pressure on valuation multiples
        • Higher real yields have materially improved fixed income's outlook, restoring meaningful income and return potential while reducing reliance on equity risk to meet investment objectives

          TD Wealth Asset Allocation Committee Strategic Portfolio Positioning

          The following outlines the current views over a 12–18 month horizon.
           

          1. Global equities remain supported by expanding earnings growth. While AI -related companies continue to lead, broader sector participation is helping sustain market gains and supports a constructive outlook
          2. Attractive yields continue to support bonds. With the BoC on hold and rates remaining elevated, income is expected to drive returns while providing stability during market volatility
          3. Private Markets and Alternatives continue to enhance portfolio resilience. Inflation protection, diversified income streams, and improving valuation opportunities support the case for increased allocations

          Core Asset Class Allocations

          • Equities:

            Modest Overweight

            Global equity markets are in positive territory year -to-date as strong earnings growth has offset modestly lower valuation multiples. While areas driven by artificial intelligence (AI) and data centre spending continue to lead performance, improving earnings participation across a broader set of sectors have provided additional support for markets. While there could be volatility depending on Middle East oil flows and AI sentiment, we remain constructive on equities due to positive global economic and earnings growth, as well as more pro -business government policies.

          • Fixed Income:

            Modest Underweight

            The Bank of Canada (BoC) can continue to be patient and on hold with respect to its rate policy given the two -sided risks from growth and inflation. Despite persistent geopolitical volatility and policy uncertainty, global higher -for-longer rate dynamics are anchoring bond yields at attractive and historically elevated levels. As such, we expect that income will drive bond returns, enabling bonds to provide a measure of stability during periods of broader market volatility.

          • Private Markets and Alternatives:

            Modest Overweight

            We believe an allocation to alternative assets can benefit diversified portfolios, particularly over the long-term. Alternatives can offer inflation protection and attractive absolute returns, while enhancing portfolio stability through diversification and less‑correlated income streams. Recent geopolitical developments have reinforced the role of alternatives as sources of resilience. Given the nature of private assets and the current phase of value adjustment across several markets, we believe this may be an attractive time to increase or consider an allocation to alternative assets.

          • Cash & Equivalents:

            Modest Underweight
             

            We maintain a modest underweight to cash as prospective returns are expected to remain limited relative to other asset classes. In this environment, we see greater value in deploying capital into higher-returning asset classes.

          Asset Class Views and Outlook

           

          • Canadian Equities

          • Modest Overweight

          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. Equities

          • Neutral

          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 U.S. Federal Reserve cuts, and the potential for further deregulation offer additional tailwinds. Key sources of volatility include concerns around AI driven disintermediation in the Information Technology Software & Services sector, the trajectory of AI capital expenditure (capex) and funding, and ongoing geopolitical uncertainty.

          • International Equities

          • Modest Underweight

          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

          • Neutral

          Emerging Markets provide exposure to technology companies with strong earnings growth potential, driven by AI spending. China continues to face challenges with weak domestic consumption and its property market.

          • Domestic Government Bonds

          • Modest Underweight

          Canadian rates have outperformed recently on softer domestic data, but the BoC remains firmly on hold. With domestic policy largely anchored, further moves in yields are likely to be driven by U.S. rates and global term -premium developments.

          • Investment Grade Corporate Credit

          • Modest Overweight

          Spreads remain near cycle tights amid resilient fundamentals. While AI -related capex and M&A activity continue to drive elevated issuance, investors are becoming more price sensitive, particularly toward frequent issuers, limiting further spread compression near term for AI -related sectors.

          • Global Bonds-Developed Markets

          • Modest Underweight

          A resilient U.S. economy continues to support a higher -for-longer rate environment. Uncertainty surrounding future central bank reaction functions, rising global term premia, and higher Japanese government bond yields, are expected to contribute to elevated volatility across developed market bond markets.

          • Global Bonds-Emerging Markets

          • Modest Overweight

          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.

          • High Yield Credit

          • Neutral

          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

          • Modest Underweight

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

          • Domestic Real Estate

          • Modest Underweight

          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.

          • 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. In Japan, strong office, residential, retail, and hotel fundamentals continue to support rental growth despite rising rates. In Korea, healthy office, industrial, and hotel markets should support stable returns, though higher financing costs are making performance increasingly income -driven.

          • 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, energy storage and supporting infrastructure, creating compelling investment opportunities.

          • Global Private Credit

          • Modest Overweight

          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.

          • Investment Grade Private Debt (Universe)

          • Modest Underweight

          High credit quality and global diversification can provide an income ballast in an uncertain economic environment. A robust illiquidity premium can provide a vital income boost in an environment of narrowing public credit spreads. Incremental income and potential capital appreciation from interest rate moderation may provide upside.

          • Commodities (Gold, Energy, metals, agriculture)

          • Modest Overweight

          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.

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

          • Modest Underweight

          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.

          For more details about TD's Wealth Asset Allocation Committee, click here

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