How to Invest Amid AI Volatility: JPMorgan Shares Where to Hide Out

If you’re looking for a place to hide out in the stock market as AI continues to disrupt industry after industry, JPMorgan Asset Management says to look to the quality factor.

“Quality” in this case isn’t a general term of approval. Quality stocks are those with strong and consistent cash flow and earnings, experienced management teams, and competitive advantages.

It may sound like an obvious place to be at all times, not just when things are volatile. But the factor has lagged the broader market over the last year and beyond as investors have piled into more speculative stocks.

According to JPMorgan data, quality is in one of its worst stretches in almost two decades. Here’s the performance of the MSCI World Quality Index relative to the MSCI World Index.


quality factor underperformance

JPMorgan Asset Management



Here’s a year-by-year look at the performance. Quality stocks underperformed their counterparts by almost 5% in 2025.


quality stocks

JPMorgan Asset Management



Rough patches like this have, in the past, tended to bode well for future performance, the bank said.

“Periods of quality underperformance can be followed by sharp reversals,” Meera Pandit, a global market strategist at JPMorgan Asset Management, said in a February 4 report.

What’s more, if the broader market were to plummet, investors are likely flock to the quality factor, the report said.

“The period from 2003 to 2008 provides a prime example. Higher-quality companies lagged broader developed markets for four consecutive years from 2003 to 2006, in the run-up to the global financial crisis,” Pandit said. “But as the cycle matured and the global economy eventually entered recession, higher-quality fundamentals returned to the fore, with quality stocks outperforming by 7 percentage points in both 2007 and 2008.”

“Developed market stocks have seen nine drawdowns of 10% or more over the last 30 years,” the report continued. “During these periods, quality stocks have outperformed 78% of the time, with a median excess return of 3.4 percentage points.”

Examples of broader quality factor funds include the iShares MSCI Global Quality Factor ETF (AQLT) and the Vanguard US Quality Factor ETF (VFQY).

But for investors who do decide to lean into quality stocks, Pandit said to be conscious of those with a high weighting in AI stocks, as the theme could lead the next market drawdown.

One example of a quality fund that appears to have limited exposure to AI hyperscalers and software stocks among its top holdings is the Invesco S&P 500 Quality ETF (SPHQ). It’s largest 10 holdings include: Costco, Visa, Mastercard, GE, Apple, Procter & Gamble, Lam Research, Coca-Cola, Caterpillar and Merck.



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