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TD Wealth Market Insights: February 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 – February 2026

  • 1

    Rotation, Not Risk-Off: Major U.S. indices were mixed in February, with mega cap technology and software companies underperforming amid concerns over AI disruption and the return on investment required from growing capital investment. While the S&P 500 Index was weaker for the month, its equal weighted counterpart outperformed, as more cyclical areas of the market made gains. Sector leadership broadened to energy, utilities, staples, healthcare, and commodities. Treasuries rallied as yields fell and the curve flattened. The price of gold and silver surged, while the dollar also strengthened.

  • 2

    Tariffs on Trial: On February 20th, The Supreme Court ruled that the Emergency Economic Powers Act does not authorize the executive branch to impose tariffs without explicit congressional approval. The decision invalidates most country-specific tariffs imposed since the administration took office but does not rule on whether previously collected tariff revenue must be refunded. Alternative tariff paths are being pursued and we expect 2026 will begin much like 2025, with elevated tariff uncertainty that subsides with time but weighs on the economy and pushes bond yields higher over the near-term thanks to higher inflation pressures.

  • 3

    Middle East Tensions Boil Over: Escalating concerns over Iran’s nuclear program prompted a sustained military buildup in the Middle East over the month, pushing energy prices sharply higher. These tensions boiled over in late February, when coordinated U.S. and Israeli strikes targeted Iranian government, military, and intelligence sites. Iran responded quickly, pushing the region back toward open conflict. Historically, market reactions to military flareups have tended to be brief and quickly reversed, so the likelihood of a more severe and protracted scenario currently remains low. In this environment, maintaining diversification and a long‑term investment focus can help investors remain resilient amid heightened uncertainty.

 TD Wealth Asset Allocation Views – February 2026

  • Equity – Modest Overweight

    • Global equity markets have rallied over the past year due to positive earnings trends and Artificial Intelligence (AI), which resulted in valuations expanding.
    • While there could be volatility around AI and economic expectations, we remain overweight equities as earnings growth, as well as increasingly pro-business government policies, create a supportive backdrop for the markets.

  • Fixed Income – Modest Underweight

    • While market-based inflation expectations remain anchored, the Federal Reserve will continue to emphasize developments in the labor market.
    • As there is room for further rate cuts over the next 12 to 18 months, bonds have the potential to generate capital gains, in addition to providing income.

  • Cash & Equivalents - Neutral

    • Cash rates are expected to ease as short-term rates fall, 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

3.50

3.25

3.25

2-yr Govt. Bond Yield

3.89

3.72

3.60

3.47

3.50

3.35

3.35

3.35

10-yr Govt. Bond Yield

4.23

4.24

4.16

4.17

4.30

4.25

4.15

4.10

30-yr Govt. Bond Yield

4.59

4.78

4.73

4.84

4.95

4.80

4.65

4.60

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

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