“Quality tends to perform best when other styles, and the broader market, are struggling,” said BlackRock. “Quality typically outperforms momentum during periods of turbulence. During the most recent pullback, quality once again outperformed, albeit by a relatively small margin. Most likely, part of the reason quality did not offer more protection was the nature of the selling.”
Quality stocks can also be less volatile than the broader market. For example, QUAL’s three-year standard deviation of 9.76% is slightly below that of the S&P 500.
“Over the long term quality has proved its worth, particularly during periods characterized by rising volatility. Since 1990, in months when the VIX rose by 20% or more, quality beat the S&P 500 by an average of approximately 60 basis points (bps, or .60%),” according to BlackRock.
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