Quality Strategy

Quality stocks have tended to fare well versus the broad market during inflationary times. Paying attention to valuation alongside quality has delivered even better results.

Though U.S. stocks are expensive relative to history, we consider the extent to which the S&P 500’s elevated P/E is driven by mix and composition effects, along with the temporary impact of Covid-19.

GMO launched the Quality Cyclicals Strategy within a fortnight of the trough that ended 2020’s quickfire bear market. This piece reports our thinking behind the strategy, its progress, and positioning.

For long-term investors searching for a durable equity solution, we believe Quality is the real McCoy.

Even when markets appear expensive – as many do today – it is possible to invest responsibly in equities if you have a strong stock selection process. Active stock picking, declared dead over and over during the formative years of...