Quality Working for Stocks, But Not Bonds in ETFs

The video discusses the performance of quality stocks and bonds, highlighting a divergence where quality stocks outperform while quality bonds underperform. It explores investor behavior in response to market changes, particularly in relation to factor products and high yield spreads. The challenges faced by quality bond ETFs, including their newer status and investor tendencies, are also examined.

What is a key characteristic of quality stocks?

• Cleaner balance sheets

• Low cash flow

• High volatility

• High leverage

How do quality stocks and bonds perform relative to each other?

• Both underperform

• Bonds outperform, stocks underperform

• Both outperform

• Stocks outperform, bonds underperform

What tends to happen when high yield spreads widen?

• Investors sell all assets

• Investors buy more high yield bonds

• Investors move to defensive bonds

• Investors flock to high-risk stocks

Why do investors often buy defensive products after a market downturn?

• To avoid taxes

• To increase risk

• To diversify their portfolio

• To chase performance

What is a reason quality bond ETFs haven't gained traction?

• They are too risky

• They are too expensive

• They are not available to retail investors

• They lack long track records