Q2 2026 Fund Commentary

Commentary and opinions are provided by TD Greystone Managed Investments Inc..

Market commentary

Markets rebounded firmly in the second quarter of 2026 after first-quarter volatility, with global and U.S. equities rallying to new record highs by early June. Performance was largely driven by continued strength in artificial intelligence (AI)-related themes and a standout quarter for semiconductor companies. Canadian equities also delivered positive returns, though gains moderated late in the quarter as declines in energy and gold prices created modest challenges.

Macroeconomic uncertainty persists, with elevated energy prices and ongoing tariff concerns weighing on inflation expectations. Despite this, credit spreads remain near historically tight levels, reflecting continued confidence in corporate balance sheets. U.S. hyperscalers, including Amazon.com Inc., Apple Inc. and Space Exploration Technologies Corp., accessed the Canadian debt market in size to fund AI-related investments. Canadian fixed income generated modest positive returns during the quarter, supported by declines in long-term yields and strong credit performance.

Performance

Security selection in international and U.S. equities contributed to performance. An underweight allocation to fixed income also contributed to performance.

The top contributor was the TD Greystone International Equity Fund, which benefited from positive security selection.

Cash holdings slightly detracted from performance as both equities and fixed income outperformed, although cash is necessary from a liquidity standpoint.

The TD Emerald Canadian Short Term Investment Fund was the largest individual detractor over the quarter because of asset allocation effects.

Portfolio activity

U.S., international and Canadian equity weights were reduced as the underlying holdings drifted upward past the target overweight and, in the sub-advisor's view, it was prudent to take profits and rebalance back to target. Proceeds from the equity rebalance were invested into money market instruments, providing optionality if new opportunities arise.

Outlook

In the sub-advisor's view, the macroeconomic backdrop remains modestly constructive. Clear risks remain, including uncertainty tied to the ongoing Middle East conflict and the potential for a more aggressive interest rate path under a new U.S. Federal Reserve Board Chair. These risks are being balanced by supportive dynamics, including continuing AI-driven capital expenditure momentum and valuations that are elevated but not obviously stretched. The sub-advisor has taken profits and reduced equity back to the target overweight, reallocating toward the short end of the curve. The sub-advisor remains attentive to macroeconomic developments and prepared to add core fixed income should yields become more attractive, while continuing to emphasize diversification.