More time at home has, for many of us, meant more time with our families (for some maybe even more than we’d like). But not all together time is quality time, as any parent of a teenager can vouch. That’s because quality time is thoughtful and deliberate: higher standards are applied to quality time than simply passing time, and the same is increasingly being demanded of investment opportunities.

The through line that runs between all corners of the financial markets – and throughout this piece – is a near-universal gravitation toward quality. As America’s powerful economic restart moderates, we focus on quality in both U.S. equity and fixed income allocations, while maintaining above-average exposure to regions gaining economic momentum, like Europe and Canada. On the other side of the globe, China is undertaking major reforms to refocus on the quality, and not just the quantity, of economic growth. This piece reflects BlackRock Investment Institute and iShares Investment Strategists’ take on how these themes are playing out across asset classes:

Canadian equities: Cyclicality and dividends

After a delayed vaccine rollout in Canada, the activity restart has arrived and is gaining momentum. This is particularly beneficial for Canadian stocks, where more than 70% of the market cap is defined as being cyclical in nature. The higher dividend yield, strong expected earnings growth and cheaper valuations also augur well for Canadian equities.

U.S. equities: Equities, earnings and the economic restart

Peak growth may be behind us, but that has not derailed the U.S. equity market. While U.S. equities can provide - and in our analysis often have provided – positive returns in mid-cycle periods, there is cause to be selective as dispersion among sectors and industries historically has risen.

International equities: Quality over quantity

China’s recent regulatory crackdown rattled markets, but is likely to moderate, counterbalanced by a dovish shift in macro policy and a new focus on quality rather than quantity of growth. This may be beneficial to long-term growth, supporting our strategic case for China.

Fixed income: The new role of bonds in a balanced portfolio

Against the backdrop of historically low yields and the rising correlation of bond and equity markets, we believe that it’s time to rethink the role of fixed income. We favor a disaggregated approach to the Universe Bond Index, seeking quality in credit, and limiting duration in line with our view for fundamentally driven higher rates by year-end.

Factors: Quality focus

Our belief that we are entering a mid-cycle environment supports our preference for quality stocks. Still-strong growth rates will continue to support cyclical, value-oriented companies, but we favor hedging potential slowdowns with quality exposures that exhibit a lower beta to economic growth.