Investors need to deal with risk and uncertainty. Nevertheless, the noise level through the first few months of this year has admittedly felt higher than normal. The threat of tariffs, higher U.S. inflation, and a major shift in U.S. policy with respect to the war in Ukraine, are just a few of the challenges that investors have faced this year. But global equity markets have been resilient in the face of these issues and are higher year-to-date. Moreover, government bond yields are close to the levels they were at to start the year. And, the beleaguered Canadian dollar, has shown signs of life of late as it has strengthened recently.

Tariffs continue to be on everybody’s mind. Despite many threats, the U.S. government has undertaken one action so far: an additional 10% tax on Chinese imports. Yet, the risk of new tariffs remains: the U.S. is expected to revisit its plans for Mexico and Canada in early March, it is planning tariffs on all steel and aluminium imports later next month, and it seems tempted to bring Europe into its crosshairs in the not-too-distant future. But markets have thus far taken the view that the worst-case scenario has already been avoided: wide ranging tariffs that were expected to be enacted over a month ago. Instead, delays, extensions, more targeted tariffs, and exceptions have emerged as the strategy so far. Should this persist, the approach seems consistent with what was experienced during President Trump’s first term in office.

Another challenge investors had to grapple with recently was the U.S. inflation reading for the month of January. It was higher than expected and the breadth of inflationary pressures also widened, suggesting a broader range of goods and services are experiencing some pricing pressures. While it’s just one month worth of data, investors will undoubtedly be watching to see if these pressures persist over the months to come. These views were shared by members of the U.S. Federal Reserve who suggested they are reluctant to lower interest rates any more until further progress on inflation is made.

Global equities have performed well despite these headlines. It suggests markets are looking past the noise and continue to have confidence in the earnings growth potential over the next few years. However, we do not think investors should be complacent in the wake of the market’s resilience. We continue to watch for additional signs that corroborate the market’s strength. One such indicator is rising market breadth, which would suggest that an increasing number of stocks are making new highs. Should this occur, it would help confirm that the bull market for stocks continues to be on solid footing.

Thanks for tuning in and see you in two weeks.