A near-term rebound of the quality factor is not expected

A near-term rebound of the quality factor is not expected

The Quality factor, a long/short basket pair representing the outperformance of firms with high returns on equity, low leverage, and stable earnings relative to a basket of stocks with the opposite financial metrics, has jumped by 4% since last week. However, that rebound comes on the heels of a 17% drawdown since July, the factor’s sharpest decline in recent years outside of late 2020 and early 2021.

By: David Kostin