Market & Topical Perspectives

Quality Never Goes Out of Style

Quality Never Goes Out of Style

The ample liquidity that predominated in the years following the global financial crisis fueled a prolonged period of growth stock outperformance at the expense of value names. However, changing macroeconomic dynamics in 2022 ushered in the more volatile investment environment that persists today.

Key Takeaways

  • As central banks grapple with still-high levels of inflation and softening economic growth, changes in financial system liquidity have been met with market volatility.

  • Today’s macroeconomic backdrop—characterized by high benchmark yields, a shrinking Federal Reserve balance sheet and a declining money supply—appears to be closer in spirit to the mid-2000s than the bull-market years preceding the current Fed tightening cycle.

  • Recent strains in the banking sector underscored the pronounced vulnerabilities inherent in today’s financial system and the potential for unintended consequences as authorities attempt to unwind years of highly accommodative monetary policy.

  • We believe investment success will be predicated less on exposures to particular styles or geographies and more on identifying quality companies globally whose tangible and intangible attributes position them to navigate a complicated environment.