05 NOVEMBER 2026
The “quality” equity factor focuses on companies with strong balance sheets, consistent earnings and robust cash flows.
These characteristics tend to make them more resilient businesses, capable of compounding strong returns over the long term.
However, quality stocks can be sensitive to rising bond yields, as higher discount rates weigh on the valuations of companies with durable, long-term earnings streams.
The sharp rise in borrowing costs in recent years has been a headwind to this investing style.
As the chart shows, the performance of quality stocks relative to the global index has fallen to a 10-year low.
Yet with bond yields likely approaching a cyclical peak, the backdrop for quality equities may become more favourable over the coming months.
Bentley Reid & Co (UK) Limited (FRN 572096) is authorised and regulated by the Financial Conduct Authority.
This communication is provided for information purposes only. Bentley Reid believes that, at the time of publication, the views expressed herein represent fair opinion; however, no assurance can be given that any illustrated or referenced performance will be achieved or repeated. All data and graphical information are believed to be accurate at the time of capture but may be subject to change and may not reflect current conditions. Fluctuations in exchange rates may cause the value of investments to rise or fall.
Recipients considering any action based on the content of this communication should seek independent advice from a professional adviser appropriate to their individual financial circumstances. Capital is at risk, and investors may receive back less than the amount originally invested. Neither the publisher nor any of its subsidiaries or connected parties accepts any liability for direct or indirect loss arising from reliance on, or use of, the information contained in this communication.
Quality stocks face pressure from higher bond yields. Explore why a peak in yields could…
With US debt nearing US$40 trillion, investors are questioning how long higher borrowing costs can…
Inflation concerns are rising again, but well-anchored expectations suggest persistent inflation pressures remain limited.
