Q4 2025 Fund Commentary

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

Market commentary

Global equity markets were volatile during the fourth quarter of 2025. Investor concerns around high equity valuations emerged, particularly in stocks benefiting from artificial intelligence (AI). There were also concerns around uneven economic growth and shifting central bank expectations. Cyclical sectors led performance across regions. Canada led developed market equity returns with strong contributions from the materials, financials and consumer discretionary sectors.

Canadian fixed income returns were challenged as Government of Canada (GoC) yields rose. Yields on two-year GoC bonds increased by 12 basis points, while 30-year yields rose by 19 basis points, resulting in a steepening of the yield curve.

Performance

Within the Fund’s equity holdings, exposure to Canadian, U.S. and international equities detracted from performance. Stock selection in the Canadian materials sector detracted from performance. Selection within U.S. information technology and communication services sector stocks detracted from performance. In international equities, selection in the consumer discretionary and financials sectors also detracted from performance.

Within fixed income holdings, underweight exposure to bonds contributed to the Fund’s performance as bond yields rose.

Portfolio activity

The sub-advisor increased the Fund’s allocation to fixed income with profits taken on the sale of equity holdings. The Fund’s equity allocation was reduced to take profits.

Outlook

The sub-advisor has a positive outlook for riskier assets and the broader macroeconomic picture. While risks to inflation remain in the long term, 2026 may see inflation normalize in Canada and the U.S. In the sub-advisor’s view, this, combined with a slowing Canadian labour market, could see yields decline modestly. The sub-advisor believes that supportive elements, such as positive economic momentum, resilient earnings and business investment in AI should be supportive for equity returns.

Consumer sentiment and the labour market will be monitored for signs that the expansion continues to broaden beyond AI and AI capital expenditure. The Fund’s overweight equity exposure should continue as the expansion broadens. The sub-advisor will add to Fund holdings if markets pull back from current levels.

The Bank of Canada is likely to hold interest rates steady and proceed with caution, balancing inflation uncertainty against a weakening labour market.