Markets dropped midweek as major banks in the U.S. warned earlier in the week that recession looms in 2023. Both JP Morgan CEO Jamie Dimon and Bank of America’s CEO Brian Moynihan recently shared concerns that the economy would slow in early 2023, or even contract according to Moynihan. Investors looking at their portfolio plans entering the new year may be looking for the right equities play, and might want to consider a quality growth ETF like the American Century STOXX U.S. Quality Growth ETF (QGRO).
While there are concerns about growth strategies moving forward, that hasn’t stopped flows into large growth ETFs. According to YCharts, the category has added $8.1 billion in one-month flows, returning 7% in that time, compared to $27 billion in YTD flows and -26% in YTD returns.
Still, past performance doesn’t guarantee future returns, so investors looking for some growthier options for 2023 might want to add a quality angle. Quality investing, which relies on assessing firms based on fundamental criteria, could be a powerful differentiator as rates continue to rise and the economy slows.
QGRO could make for an interesting quality-focused option. The ETF tracks the iSTOXX American Century USA Quality Growth Index, which screens stocks using metrics like sales, profitability, cash flow, and return on assets and equity to identify those securities with the strong growth, quality, and income.
QGRO aims for larger companies with less volatility to mitigate growth risk, with 30 to 65 percent of its assets in stable growth companies with attractive profitability and valuation for balance. By adding in more mid cap allocation than a standard quality growth ETF might have, it gets added diversification out of the large cap space.
Charging 29 basis points, the strategy has seen $17.5 million in net inflows over one month according to VettaFi, outperforming both the ETF Database Category Average and the Factset Segment Average by 0.3% and 2.1 % respectively.
With uncertainty the name of the game for 2023 right now, investors making equities plans may be on the lookout for a balanced, quality-focused play. QGRO could be an option to keep an eye on as the year comes to an end and rate hikes continue apace.
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