Navigating Bull Markets: Why Quality Stocks Remain Attractive

There is significant evidence to suggest that quality investing works over the long run. These results are robust in out of sample, and especially strong when multiple definitions of quality are combined¹. It is also well established that quality is resilient during recessionary or uncertain markets¹. Yet one open question is how do quality equities behave in bull markets.

Quality Factor Relative Performance During Bull Markets in the S&P 500

Source: Bloomberg as of 14th October 2025

The chart above plots the S&P 500 Index (dark line) and the relative performance of the S&P Quality Factor (light line). Highlighted are historic bull markets. The evidence suggests that since 1994:

• Historically, quality outperforms, or at least keeps up during the length of bull markets
• Quality tends to go sideways relative to the S&P 500 in the final stages of a bull market
• During bear markets, quality outperforms strongly 

The current phase of the market appears different. Quality is underperforming. In part this can be explained by relative strength earlier in 2025 in the face of tariffs-induced convulsions. Once those clouds cleared, quality lagged. Equally the rising concentration of the market in tech stocks and AI is another factor creating this anomaly.

Where do we go from here?

Given the long term history of quality investing, even in bull markets, the current set up is one that could potentially be attractive for investors with a long-term perspective.

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