SEIA's Sol: 'Quality Everywhere' Amid Higher for Longer

With financial markets rattled by the latest inflation data and expectations pushed back for interest rate cuts by the Federal Reserve, at least one investment strategist is finding promise in quality and cash-flow factor strategies.

“It’s clear the Fed still has a lot more work to do,” said Christine Sol, investment strategist at SEIA, a $22 billion advisory firm based in Los Angeles.

Sol, who describes the closely-watched Fed monetary policy as “higher for longer, for longer,” points out a short list of market anomalies that she believes financial advisors and investors should be considering right now.

“We haven’t seen a 2% down day for stocks in more than a year and the last two quarters have produced double digit returns for the S&P 500, which hasn’t happened in decades,” she said. “Right now, the market is winning, but clearly there are a lot of unknowns.”

Along those lines, Sol is preaching “quality everywhere, all the time.”

“I really like quality and low-volatility factors for their opportunistic and defensive characteristics,” she said. “You want to lean into quality all at once because you want companies with strong balance sheets where they don’t need to borrow.”

Specifically, she cited the iShares MSCI USA Quality Factor ETF (QUAL), the VictoryShares Free Cash Flow ETF (VFLO) and the Invesco S&P 500 Low Volatility ETF (SPLV).

“Low volatility is kind of boring,” Sol said. “Our clients aren’t jazzed by it and I’m not either, but these are great ways to get invested and stay invested.”

Earlier this week, a cautious U.S. central bank was concerned enough about recent upticks in inflation and mixed economic data that it would not commit to present or future cuts to the federal funds rate, according to minutes of the bank's Federal Open Market Committee's (FOMC) March meeting.

FOMC, which typically meets eight times per year to discuss potential changes to monetary policy, left the rate unchanged at between 5% and 5.25%, where it's stood since last July after the last of a series of increases to the funds rate—the short-term interest rate commercial banks charge one another on borrowing and lending their excess reserves.