Market Updates & Outlook
October 02 2026

Monthly Portfolio Outlook

10 min

Market & Portfolio Highlights

    • Market Trends: Global equities remain supported by strong earnings growth and broader participation across sectors and companies. Meanwhile, energy price volatility, resilient economic conditions and tighter monetary policy continue to influence markets and inflation expectations.
    • Asset Class Views: TDAM maintains a constructive view on equities and continues to see opportunities across global markets. Fixed income offers resilient income and diversification benefits, while selective positioning remains important given tight credit spreads.
    • Key Takeaways: Higher interest rates continue to enhance the income potential of bonds, while commodities, and alternative assets can help strengthen portfolio resilience amid ongoing geopolitical and economic uncertainty. Maintaining a balanced, diversified portfolio remains important in the current market environment.

    Views Provided by the TDAM Client Portfolio Management team

    Equities

    High Energy Prices Present Mixed Market Signals

      Source: Bloomberg Finance L.P. As at September 25, 2026. 
       

      • Elevated oil and refined product prices are supporting earnings and cash flows across the Energy sector, reinforcing its role as an important contributor to equity market returns
      • Higher energy costs act as a tax on consumers and businesses, increasing transportation, manufacturing, and operating expenses while reducing discretionary spending power
      • Energy price inflation may complicate central bank efforts to ease monetary policy, potentially weighing on broader economic growth and equity valuations

      Fixed Income

      An Opportunity to Lock-in Income

      Source: Bloomberg Finance L.P. As at September 25, 2026.
       

      • Government bond yields continued their climb to levels flashing: Income opportunity
      • Geopolitical tensions, elevated government and corporate debt issuance (including artificial intelligence (AI)-related spending) continued to pressure bond yields higher
      • The U.S Federal Reserve's (the Fed) September rate hike reinforced inflation-fighting credibility, improving the risk-reward for duration and core fixed income
      • Yield without the reach: Investment grade bonds deliver compelling income without reaching for risk

      Private Markets

      Large Scale Infrastructure Investment Demand Ahead

      Source: Source: Preqin, McKinsey analysis. As of Mar 31, 2026.
       

      • The recently held Canada Investment Summit reinforced the importance of private capital in supporting energy, digital and transportation infrastructure
      • With an estimated US$106 trillion of infrastructure investment required globally by 2040, societal needs continue to exceed government funding capacity
      • Given the rise in bond yields, private credit spreads remain stable, leading to attractive all-in interest rates generated by mortgage and private debt funds

      Asset Allocation

      Brent Crude Oil Price vs. U.S 10 Yr Treasury Yield

      Source: Bloomberg Finance L.P. As at September 23, 2026.
       

      • Historically, Brent crude and U.S. 10-year Treasury yields moved closely together, reflecting inflation expectations and required investor compensation.
      • In recent years, that relationship weakened due to factors such as excess oil supply and broader disinflationary trends
      • Today, the key issue is that rising oil prices are pushing bond yields higher. When Brent exceeds $90 and the 10-year nears 5%, markets begin pricing higher inflation and borrowing costs, creating headwinds for long-duration bonds and growth assets.

      TD Wealth Asset Allocation Committee Strategic Portfolio Positioning

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

      1. Strong earnings growth continues to support equity markets, with participation broadening beyond AI-driven sectors and into a wider range of industries, reinforcing a constructive outlook despite potential volatility.
      2. While energy-related inflation risks remain a concern, bonds continue to offer attractive income and portfolio diversification benefits, particularly as global inflation expectations stabilize.
      3. The WAAC remains positive on Private Markets and Alternatives due to their ability to enhance diversification, provide resilient income streams, and capitalize on opportunities created by ongoing repricing across private markets.

      Core Asset Class Allocations

      • Equities:

        Modest Overweight

        Global equity markets are in positive territory year-to-date (YTD) as strong earnings growth has offset modestly lower valuation multiples. Areas driven by and data centre spending continue to generate strong growth, with earnings participation broadening across a wider range of sectors and providing additional support for markets. While there could be volatility depending on Middle East oil flows, interest rates, 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

        With renewed global energy price volatility, the Bank of Canada (BoC) is increasingly concerned about upside risks to inflation. Despite persistent geopolitical uncertainty, the move towards tighter global monetary policy could reduce long-term inflation expectations. As such, bonds are more likely to enhance portfolio diversification during periods of broader market volatility in addition to providing income.

      • 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

      The Canadian government continues its push to implement pro-investment policies through the recently announced "Productivity Mega Deduction" and efforts to streamline project permitting. However, U.S. trade remains a source of uncertainty. The S&P TSX Composite Index (TSX) sector mix acts as a diversifier for U.S. and emerging markets, that are heavily influenced by the Information Technology sector. TSX returns are supported by strong earnings growth, balance sheets, and 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 activity and its property market, but its export oriented sectors have been robust.

      • Domestic Government Bonds

      • Modest Underweight

      Renewed global energy price volatility is drawing the BoC's attention to upside risks to inflation. While domestic policy remains 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 earnings and solid fundamentals. AI-related capital expenditure (CapEx) and M&A activity continue to drive elevated issuance, raising investor price sensitivity. Thus far, the heavy primary issuance has had a greater impact on yields than on spreads, but it has limited any spread compression and widened risk premiums for AI-related sectors.

      • Global Bonds-Developed Markets

      • Neutral

      As developed market central banks raise policy rates, investors' inflation concerns are expected to stabilize. This can help anchor or even reduce volatility of global long bond yields. This creates attractive income generating opportunities, net of currency hedges, for Canadian investors in select markets.

      • Global Bonds-Emerging Markets

      • Neutral

      Emerging market government bonds have outperformed recently, and yields relative to developed market peers now appear fair to rich across many countries. Returns may also face headwinds from currency volatility amid the the Fed's interest rate hikes to combat inflation. Even so, we continue to see opportunities in select countries with attractive income levels, particularly in Latin America and Africa.

      • 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 rising policy rates that could create more restrictive lending conditions. As a result, we remain neutral and favour the higher quality portion of the sector.

      • 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.

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