Low Qual Is Leading the Charge

The stock market was up every day last week, and it’s up again today. If the market holds, this will be another all-time high close.

Friday’s jobs report showed that the U.S. economy created 49,000 net new jobs last month. The unemployment rate fell to 6.3%. Very roughly speaking, I’d say we’re about 10 million jobs away from something resembling full employment.

On our Buy List, Trex (TREX), Abbott Labs (ABT) and Disney (DIS) are all at new highs, and Ansys (ANSS) is very close. There are no Buy List earnings reports today. Our next one will come tomorrow when Fiserv (FISV) reports after the close.

One of the factors that is used to dissect the market is “quality.” Analysts like to see if high-quality stocks are leading the charge, or if they’re being left behind. That’s assumed to be a good indicator of what investors are thinking.

At the outbreak of the coronavirus, investors flocked to high-quality names. That makes sense. But since May, high quality has lagged. Actually, it’s lagged pretty badly.

Here’s a chart of Fidelity’s Quality ETF divided by the S&P 500.

Posted by on February 8th, 2021 at 11:53 am


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