The best time to buy quality stocks is now

AMID mounting fears of an artificial intelligence (AI)-led bubble, many investors feel trapped between the optimists who say high valuations for stock prices make sense because AI is the biggest tech revolution, and pessimists who say this time is no different and any bubble eventually deflates. The trap feels deeper for lack of options, since gold, bonds and other havens also look pricey.

But there is a once-in-a-generation opportunity in global markets that could deliver strong returns, regardless how AI mania plays out. The opportunity is in quality stocks, particularly those trading relatively inexpensively. As defined by MSCI indices, “quality” stocks are characterised by a high return on equity, stable earnings growth and low debt levels.

Worldwide, only about one in five stocks make the cut. Over the past three decades, they have steadily beaten the market as a whole, and other investment strategies such as growth or value. For that reason, quality stocks are often expensively valued. But that is not the case today.