The Curious Case of Quality

William Blair argues that quality stocks are poised for outperformance as the macro regime shifts from low-rate momentum to a supply-shock environment favoring balance sheet strength. Historically high dispersion and attractive valuations make high-quality companies a compelling 'Quality at a Reasonable Price' (QARP) opportunity.

Key Takeaways

• 1.Quality stocks have underperformed recently due to a post-GFC regime of low inflation and low rates, which favored momentum over fundamentals.
• 2.The inflation regime has shifted toward supply-driven volatility and structurally tight labor markets, reintroducing a premium on pricing power and capital discipline.
• 3.Extreme market dispersion and narrow leadership have left many high-quality firms trading at attractive relative valuations, creating a 'stock-picker's market'.

Table of Contents

• What Is Quality?
• Quality Performance
• Inflation Regimes & Market Performance
• Why Quality Makes a Comeback
• QARP
• Conclusion
• Highlights in the Week Ahead
• Indicators of the Week: Housing Starts
• Economic Scorecard
• Other Economic Indicators
• S&P 500 Sector Performance
• IMPORTANT DISCLOSURES

Document Preview

Page 1 of 5

Subscribe for full accessStart Free Trial