With a risk averse investing style becoming very popular within the last year, the surge in “Safe” and “Quality” stocks has been booming. A safe and quality stock is one in which the company or bank has low debt and high profitability. The recent growth in this investment could be linked to various fiscal tremors from around the world.
The quality stocks have always been well traded but in the recent year they have been performing better than more valuable riskier stocks. According to Nomura’s Masanari Takada, this is a wake up call, with demand shifting to more safe assets there is a shadow of doubt looming over fiscal markets.
The hunt for top quality stock looks like it is only going to intensify. The Russell 2000 has one fourth of the indexes posting negative earnings which have been historically seen on the eve or during recessions according to Bank of America.
Many strategists have been telling money managers to be on the defensive due to approaching the end of the a cycle. This behavior at the end of a growth cycle is very common, stocks that are seen as defensive and conservative will usually receive a bump at this portion of the cycle.