Quality’s Performance Across the Business Cycle

An analysis of how quality stocks have fared across different economic environments

Quality stocks have been shown in studies to have robust historical performances.1 This analysis takes a deeper look into the Quality factor’s performance by breaking out its history into the four stages of the business cycle: Early, Mid, Late, and Recession.

Observing the performance of Quality for each of these unique periods yields evidence that Quality stocks tend to perform better in Late and Recession stages, while underperforming in Early stages. Quality’s performance in Mid stages is also generally solid; however, there are multiple periods in this stage where the Quality factor has underperformed, including the late ’70s and the mid 2000s.

Download our whitepaper →

Important Disclosures

1Asness, C.S., Frazzini, A. & Pedersen, L.H. Quality minus junk. Rev Account Stud 24, 34–112 (2019). https://doi.org/10.1007/s11142-018-9470-2.

This information is provided for illustrative purposes only. Opinions and views expressed constitute the judgment of Polen Capital as of March 2023 may involve a number of assumptions and estimates which are not guaranteed and are subject to change without notice or update. Although the information and any opinions or views given have been obtained from or based on sources believed to be reliable, no warranty or representation is made as to their correctness, completeness, or accuracy. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice, including any forward-looking estimates or statements which are based on certain expectations and assumptions. The views and strategies described may not be suitable for all clients. This document does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction.