Could it be time for a resurgence in quality?

Schroders

John Chisholm

Research

10 Pages

Schroders argues that international quality stocks may be near a turning point after years of value leadership. Quality has lagged value by roughly 10% per year over three years, while valuation dispersion sits near unusually low levels.

Key Takeaways

Quality Looks Washed Out: MSCI EAFE Quality has underperformed MSCI EAFE by 19% over three years, one of its worst drawdowns in decades.
Valuation Spreads Matter: Developed market dispersion reached negative 0.85 standard deviations in January 2026 and negative 0.79 by March 2026.
History Favors Quality: After the last four dispersion troughs, quality beat value by 7.7% over one year and 5.5% annualized over three years.
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