“Buy quality, cry once”

The first chart below shows the drawdown of MSCI Europe Quality Net relative to MSCI Europe Net. Never before has Quality (stocks with low leverage, stable earnings and high profitability) underperformed to this extent.

The second chart shows the rolling five-year relative performance of MSCI Europe Quality Net versus MSCI Europe Net. Never before has Quality underperformed this much over a five-year period. The last time Quality recorded a five-year underperformance of -10% (in 2007, indicated by the red arrow in the chart), it was followed by outperformance of +8% over one year, +17% over three years, and +32% over five years. Today, the five-year underperformance is -16%.

Investments always involve risk. Unit prices may rise or fall in value, and investments are always associated with a risk of loss. Past performance is never a guarantee of future returns. This is not investment advice.