Why You Should Bet On Quality ETFs Now

After a recent series of new highs, Wall Street retreated on doubts over the trade deal that has undermined bullish sentiments and led to risk-off trade once again. This is especially true as the phase one trade deal between Washington and Beijing could slide into next year as Beijing presses for tariff rollbacks. If the trade deal is not reached, President Donald Trump would raise tariffs on Chinese imports with the Dec 15 deadline.

However, monetary easing policies and better-than-expected earnings are providing enough impetus to the stock market. Notably, lower rates have made borrowings cheaper, providing a boost to both investment in new projects and repayment of a higher-rate debt. A spate of better-than-expected data added to the strength. This is especially true as October retail sales have rebounded from a sluggish September and American consumers remain willing to spend, which is good news for domestic economic growth.

Given solid fundamentals amid trade uncertainty, investors should focus on high-quality investing.

Why Quality Investing?

Quality stocks are rich in value characteristics with healthy balance sheets, high return on capital, low volatility, elevated margins, and a track of stable or rising sales and earnings growth. These products reduce volatility when compared to plain vanilla funds and hold up rather well during market swings. Further, academic research shows that high-quality companies consistently deliver superior risk-adjusted returns than the broader market over the long term.

Given this, we have highlighted five ETFs targeting this niche strategy. Any of these could enjoy smooth trading and generate market-beating returns in a rocky market.

ETF Picks  

iShares Edge MSCI USA Quality Factor ETF (QUAL - Free Report)

This fund provides exposure to large and mid-cap stocks exhibiting positive fundamentals (high return on equity, stable year-over-year earnings growth, and low financial leverage) by tracking the MSCI USA Sector Neutral Quality Index.

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