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TD Wealth Market Insights: February 2025 Snapshot

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 Commentary

  • 1

    February Month in Review: Following a positive start to the year, financial markets were challenged by shifting trade policies and signs of moderating economic growth. Small cap and growth-style U.S. equities notably came under pressure, while international equities led monthly gains. Relatively attractive valuations outside the U.S. and more diversified sector exposures helped to lift international returns. The S&P 500 Index declined modestly over the month but remained positive year-to-date for 2025. Major fixed income indices advanced and Treasury yields moved lower as a period of uncertainty led investors express greater caution.

     

  • 2

    Touch and Go on Trade Tariffs: The incoming U.S. administration wasted no time making good on its proposed trade tariffs in February. Along with China, traditional North American allies Canada and Mexico were the early targets of a new approach to foreign trade policy. While negotiations resulted in a temporary reprieve of the largest levies, financial markets began to increasingly reflect the potential impacts of a shift in policy and new political priorities over the months ahead. 

     

  • 3

    Mixed Signals on the Economy Resilient consumer spending has been a hallmark of economic growth over recent periods and the fading sentiment reflected in recent survey data called into question the continued pace of spending for 2025. The service side of the economy also showed some early signs of deceleration in February. With jobs data on a solid footing and inflation coming to heel, we believe the Fed will maintain a patient approach to fiscal policy with any easing most likely to come later in the year.

     

TD Wealth Asset Collection Views

  • Equities – Modest Overweight

    We expect positive earnings growth to remain a driver of attractive relative returns over the medium-term.

    Earnings have been partially captured by current market valuations and we believe these are justified given the backdrop of modest economic growth. 

  • Fixed Income – Modest Underweight

    As the bond market and Federal Reserve anticipate the impact of a change in government policy, the central bank will be careful in adjusting its policy stance.

    Although bond yields, which move more inversely with price, could remain elevated, we expect bonds to continue providing both stable income and capital preservation.  

  • Cash & Equivalents - Neutral

    Recent economic developments suggest an increasing chance of below trend growth in the near-term.

    While cash rates are expected to ease gradually as short-term rates fall, an allocation to cash can help provide portfolio liquidity and optionality to capitalize on better opportunities. 

INVESTMENTS, SECURITIES AND ANNUITIES

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MAY GO DOWN IN VALUE

TD Economics Key Financial Forecasts

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The information contained is believed to be reliable, but its accuracy or completeness is not guaranteed. This is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.  

Graphs and charts are used for illustrative purposes only and do not reflect future values or future performance of any security, strategy, or investment product. Please read any prospectus or offering materials carefully before investing.  

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Diversification does not guarantee a profit or protect against a loss.  

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Forward Looking Statements  

Certain statements in this document may contain forward-looking statements (“FLS”) that are predictive in nature and may include words such as “expects”, “anticipates”, “intends”, “believes”, “estimates” and similar forward-looking expressions or negative versions thereof. FLS are based on current expectations and projections about future general economic, political and relevant market factors, such as interest and foreign exchange rates, equity and capital markets, and the general business environment, assuming no changes to tax or other laws or government regulation or catastrophic events. Expectations and projections about future events are inherently subject to risks and uncertainties, which may be unforeseeable and may be incorrect in the future. FLS are not guarantees of future performance. Actual events could differ materially from those expressed or implied in any FLS. A number of important factors including those factors set out above can contribute to these digressions. You should avoid placing any reliance on FLS. We may not update any FLS. 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. 

Investment Risks. 

Investing involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved. Past performance is not guarantee of future results. Asset allocation/diversification does not guarantee a profit or protect against a loss.  

Equities may decline in value due to both real and perceived general market, economic industry conditions, and individual issuer factors. Investing involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved. Past performance is not guarantee of future results. Asset allocation/diversification does not guarantee a profit or protect against a loss.  

Bonds are affected by a number of risks, including fluctuations in interest rates, credit risk, prepayment risk, and inflation risk. Corporate debt securities are subject to the risk of the issuer’s inability to meet principal and interest payments on the obligation and may also be subject to price volatility due to factors such as interest rate sensitivity, market perception of the creditworthiness of the issuer and general market liquidity. High yield, lower-rated securities are subject to additional risks such as increased risk of default and greater volatility because of the lower credit quality of the issues. Interest on municipal bonds is generally exempt from federal tax. However, some bonds may be subject to the alternative minimum tax and/or state or local taxes.  

International investing may not be suitable for every investor and is subject to additional risks, including currency fluctuations, political factors, withholding, lack of liquidity, absence of adequate financial information, and exchange control restrictions impacting foreign issuers. These risks may be magnified in emerging markets.  

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