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TD Wealth Market Insights: January 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 – January 2026

  • 1

    Level Up: Financial markets broadly advanced in January, overcoming renewed volatility around U.S. military action in Venezuela and geopolitical tensions, including fresh tariff threats. While the S&P 500 Index of large cap U.S. equities briefly broke through the 7,000 level, gains across emerging markets and small cap U.S. equities led for the month. Attractive valuations combined with the potential for strong earnings growth are compelling reasons to diversifying beyond U.S. large cap equities. Fixed income markets also edged higher in the month, and we believe short term bonds can benefit from attractive income levels and gains from policy easing in 2026.

  • 2

    The Fed Factor: The Federal Reserve once again took center stage in January as economists and investors navigated the potential impact of an announced Department of Justice investigation into the central bank's finances, takeaways from the January meeting of policymakers and President Trump's nomination of Kevin Warsh as the next Fed chair. Following three consecutive "risk management" cuts, the Fed expressed a more optimistic outlook and kept rates on hold at its first meeting of 2026. We expect policymakers to remain on the sidelines with a more data-dependent approach in the months ahead.

  • 3

    Taking the Shine Off Commodities: Precious metals and other commodities quickly reversed some of their 2025 gains in January on easing geopolitical tensions and shifting policy expectations. Among the biggest moves was the sharp recoiling of gold to end the month – suggesting market participants no longer see the Fed's independence as coming under threat. The nomination of Kevin Warsh to succeed Jerome Powell as the next Fed chair in May has helped to settle a key source of uncertainty for markets with reduced risk of runaway inflation pressures weighing on growth.

 TD Wealth Asset Allocation Views – January 2026

  • Equity – Modest Overweight

    • Global equity markets have had a strong year due to positive earnings trends and AI investments, 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

4.05

4.00

4.00

4.00

30-yr Govt. Bond Yield

4.59

4.78

4.73

4.84

4.60

4.50

4.50

4.50

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

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