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TD Wealth Market Insights: Q3 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 – Q3 2026

  • 1

    A Narrow Path Higher: Equity markets delivered mixed results in the third quarter of 2026. The broad-based S&P 500 and tech-heavy Nasdaq posted modest gains, while the small-cap focused Russell 2000 declined. Market participation narrowed with the largest technology and energy companies helping to support broader equity gains, even as other areas of the market struggled. Robust corporate earnings have also reinforced confidence in the broader economic outlook. Fixed income returns were more challenged as persistent inflation, higher energy prices, and expectations for tighter monetary policy pushed Treasury yields higher, while supply-demand factors added additional pressure on municipal bond performance. Despite inflationary headwinds, the U.S. economy remained resilient, supported by a healthy labor market and continued consumer spending. While market leadership was concentrated in the third quarter, a diversified portfolio and a long-term investment perspective are especially important to help navigate an evolving economic and market environment.

  • 2

    Energy Moves Back into Focus: Geopolitical tensions remained an important market driver during the third quarter as conflict in the Middle East continued with limited progress toward a long-term diplomatic resolution. Concerns surrounding global energy supplies and key shipping routes contributed to a sharp rise in energy prices, with diesel notably affected by limited refining capacity. These developments have added to inflation concerns for consumers, businesses, and policymakers. Although markets continued to navigate periods of geopolitical uncertainty, the quarter demonstrated why investors should avoid reacting too strongly to individual headlines. A disciplined approach to wealth planning can help investors tune out the daily headlines and remain focused on achieving their longer-term financial goals and objectives.

  • 3

    The Fed Changes Course: The Federal Reserve (Fed) raised its policy rate in September, marking the first rate increase since July 2023, as inflation remained above its long-term target. Expectations for tighter monetary policy contributed to a broad increase in Treasury yields, with longer-term Treasury rates rising to their highest levels in more than two decades. Higher yields created a challenging environment for rate-sensitive assets, including bonds and small-cap stocks. At the same time, economic activity remained relatively resilient, with a healthy labor market and consumer spending helping to offset concerns surrounding higher borrowing costs. While future rate hikes are anticipated, current expectations suggest any additional tightening would likely be a response to cyclical inflation pressures rather than a lasting shift in the broader economic landscape. Although the path of monetary policy remains uncertain, we expect the Fed to remain cautious and data dependent in the months ahead.

TD Wealth Asset Allocation Views – October 2026

  • Equity – Modest Overweight

    • Global equity markets are in positive territory year-to-date as strong earnings growth has offset modestly lower valuation multiples.
    • Areas driven by artificial intelligence (AI) and data center 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 the 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

    • Given renewed global energy price volatility and a resilient labor market, the Federal Reserve has raised its policy rate to counter upside risks to inflation.
    • Despite persistent geopolitical uncertainty, the move towards tighter global monetary policy could reduce market-based 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.

  • Cash & Equivalents - Neutral

    • While cash remains an important liquidity and risk management tool, its relative attractiveness is expected to diminish compared to assets with higher long-term return potential.

TD Economics Key Financial Forecasts

Q1 2026

Q2 2026

Q3 2026

Q4F 2026

Q1F 2027

Q2F 2027

Q3F 2027

Q4F 2027

Fed Funds Target Rate

3.75

3.75

4.00

4.25

4.25

4.25

4.00

3.75

2-yr Govt. Bond Yield

3.79

4.14

4.60

4.40

4.10

3.90

3.80

3.65

10-yr Govt. Bond Yield

4.30

4.44

4.90

4.70

4.55

4.40

4.35

4.25

30-yr Govt. Bond Yield

4.88

4.91

5.30

5.10

4.95

4.80

4.75

4.65

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

SECURITIES AND INVESTMENTS

NOT A DEPOSIT

NOT FDIC-INSURED

NOT BANK GUARANTEED

MAY LOSE VALUE

SECURITIES AND INVESTMENTS
NOT A DEPOSITNOT FDIC-INSURED
NOT BANK GUARANTEEDMAY LOSE VALUE

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