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TD Wealth Market Insights: Q1 2026

Source: Morningstar, TD Wealth Chief Investment Office. Indices used include the Bloomberg US Treasury TR Index, Bloomberg US Aggregate Bond TR Index, Bloomberg US Corp Bond TR Index, Bloomberg US Treasury US TIPS TR Index, Bloomberg Municipal TR Index, Bloomberg US MBS Float Adjusted TR, S&P 500 TR Index, Russell 1000 Growth TR Index, Russell 1000 Value TR Index, Russell 2000 TR Index, MSCI EAFE NR Index, and the MSCI EM NR Index. All performance is in U.S. dollars. Past performance is not indicative of future results. The indices are a tool to compare the performance of one or more indices. The volatility and performance of the indices may be greater than or less than the volatility and performance of actual investments. Indices reflect the reinvestment of dividends and income. Indices do not have fees, expenses or taxes, which would lower performance. Indices are unmanaged and not available for direct investment.

Market Brief Commentary – Q1 2026

  • 1

    Down But Not Out: Equity performance was mixed in the opening months of 2026. After a period of consecutive gains, the large-cap focused S&P 500 index took a step back in the first quarter of the year as momentum shifted away from technology and into a broader range of sectors and asset classes. Areas of resilience included U.S. large-cap and value-style equities, along with small-cap companies, which posted quarterly gains despite elevated levels of volatility. Fixed income returns were broadly flat for the quarter with mortgage-backed securities and Treasuries holding up better than corporate issues over the three-month period. While market narratives can quickly change, we believe a diversified approach and longer-term perspective are key ingredients for successful investing.

  • 2

    Middle East Conflict Weighs on Growth: Heightened geopolitical tensions sparked open conflict in the Middle East late in the quarter, with rising energy prices reigniting inflation concerns. Disruptions to energy supply routes drove the price of crude oil sharply higher while coordinated reserve releases provided only limited relief. The renewed energy shock overshadowed trade and policy debates, reduced expectations for rate cuts, and reintroduced geopolitical risk as a key source of headline risk and market volatility. Historically, short-term pullbacks driven by conflict have given way to a renewed focus on the fundamental drivers of growth, reinforcing the importance of time in the market, not timing the market. Markets may be quick to react, but investors don’t need to be.

  • 3

    Technology Rotation or Reboot?: The Information Technology sector notably underperformed in the first quarter as investors reassessed the near‑term implications of rapid Artificial Intelligence (AI) adoption, particularly within software. While we believe the long‑term productivity potential of AI remains intact, markets have more recently focused on displacement risk and uncertainty around the timing and return on elevated capital expenditures, weighing on record valuation levels. These dynamics also extended into private credit, where strategies with concentrated exposure to software‑linked borrowers faced increased scrutiny and, in some cases, redemption pressures.

 TD Wealth Asset Allocation Views – March 2026

  • Equity – Modest Overweight

    • Following a strong 2025, global equity markets have weakened in the first quarter of 2026 amid concerns that higher energy prices, driven by heightened geopolitical risks, could weigh on consumers and economic growth.
    • While volatility may persist, we remain overweight equities, supported by earnings growth and pro-business government policies.

  • Fixed Income – Modest Underweight

    • The Federal Reserve has moved incrementally more neutral on monetary policy as heightened geopolitical tensions persist.
    • We expect global bonds, including U.S. bonds, to be influenced by developments in commodity markets in the near term, keeping bond yields - and income - elevated over the next 12 to 18 months.

  • Cash & Equivalents - Neutral

    • Cash rates are expected to ease as short-term rates fall over the next 18-months, but declines should be gradual.

TD Economics Key Financial Forecasts

Q1 2025

Q2 2025

Q3 2025

Q4 2025

Q1F 2026

Q2F 2026

Q3F 2026

Q4F 2026

Fed Funds Target Rate

4.50

4.50

4.25

3.75

3.75

3.75

3.50

3.25

2-yr Govt. Bond Yield

3.89

3.72

3.60

3.47

3.70

3.45

3.35

3.35

10-yr Govt. Bond Yield

4.23

4.24

4.16

4.17

4.25

4.20

4.15

4.10

30-yr Govt. Bond Yield

4.59

4.78

4.73

4.84

4.90

4.75

4.65

4.60

Forecast by TD Economics as of March 2026; all forecasts are end-of-period. Source: FactSet, Federal Reserve Board, TD Economics.

SECURITIES AND INVESTMENTS

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NOT FDIC-INSURED

NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY

NOT GUARANTEED BY THE BANK

MAY GO DOWN IN VALUE
SECURITIES AND INVESTMENTS
NOT A DEPOSIT NOT FDIC-INSURED
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT GUARANTEED BY THE BANK
MAY GO DOWN IN VALUE

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