One word could describe markets over the last several years – resilient. Sceptics have been calling for a major correction for years and yet markets continue to trend higher. We have seen every opportunity for a sell-off including the Greek crisis in Europe, Brexit, geopolitics, and of course the new US administration - and yet resiliency reigns. So why the resiliency?

Loose monetary policy across the globe is one very good reason. Another is a Chinese economy that has so far managed steady annual growth over 5% - no small feat given their size. Yet another is a US economy that remains the world’s most resilient, dynamic and flexible. Developed market jobs growth continues to impress and wages are in fact trending higher. Even Japan, which is perennially in recession, has returned to growth. And, of course, the Canadian economy has shown a sharp rebound after oil prices threw the economy into turmoil in 2015.

The economic rebound in Canada has been helped by lower interest rates which weakened the Canadian dollar. The desired effect appears to have been achieved as GDP growth accelerated to over 3%. Unemployment has dropped to 2007 lows and wage growth has begun to emerge. These are all positive signs going forward. That said, the Bank of Canada has reversed course by raising rates back to 1.0% which corresponded with a rise in our dollar. Uncertainty around NAFTA will add further pressure to future growth.

At this point, however, it appears that much of this good news is being “priced in” to the market. In other words, valuations continue to rise as stocks move higher. The breadth of the market's performance is a measure that is important to pay attention to in this climate. Fewer and fewer stocks are contributing to the performance of indices like the S&P500. Technology and biotechnology stocks are dominating while focus on quality and value diminishes. This trend is being accelerated by machine-based trading (algorithmic) and passive (index) investing – both styles which tend to reward past performance and pay little regard to underlying fundamentals.

No one knows what the trigger would be for the next downturn, or when, but at some point, more volatility is coming as it always does. It could very well be that tax reform in the US, or lack thereof, is the shoe that needs to drop for a market correction. Much of investors' rationale for looking the other way, with turmoil in Washington, appears to hinge on this. However, we will not attempt to time the markets because this is a fool's errand that many have tried over the years to no avail, as you need to both time the exit and re-entry perfectly to succeed.

Our job is to take the emotion out of the equation and assess the value of assets through quantifiable research and unbiased assessments of business models, all in the context of a stock’s current valuation. We will continue to take profits where we have seen success, and valuations have begun to look stretched. We will seek out the highest quality companies that have been neglected due to the markets' short-term obsession with momentum. This is the best way to manage volatility through the cycle while generating investment performance that will help our clients achieve their personal goals.