Investors should target quality stocks during market volatility

On April 30, 2025, Piper Sandler's chief investment strategist Michael Kantrowitz provided guidance for investors in light of recent market volatility in the United States. He stated that a lack of clarity surrounding trade policy encourages investors to prioritize a portfolio containing stocks with robust underlying business fundamentals. Amid a complex economic climate characterized by trade tariffs imposed by President Donald Trump and concerns about a potential recession, the market has experienced notable instability. Major U.S. stock indexes were projected to complete the trading month with declines, further emphasizing the current uncertainty in the financial landscape. Kantrowitz highlighted that recent macroeconomic data indicated the U.S. economy contracted in the first quarter, contributing to the overall market apprehension. He advised that maintaining a quality bias could help mitigate the impact of market swings on investment portfolios. His analysis pointed to a delineation in market performance, where investors have tended to gravitate toward companies with strong cash flow profitability, positive earnings revisions, and free cash flow yield. Emphasizing quality stocks has garnered increasing relevance as the earnings landscape in 2025 displayed notable bifurcation between high-performing and low-performing companies. Among the favored stocks highlighted by Piper Sandler for maintaining a balanced risk profile were well-established companies in the S&P 500, such as Alphabet, Uber Technologies, Booking Holdings, Eli Lilly, and Vistra. While Alphabet’s stock price has decreased significantly this year due to broader market pullbacks impacting growth stocks, its recent earnings report indicated better-than-expected revenue growth. Conversely, Uber has outperformed, witnessing a remarkable rise in its stock price as it prepares to deliver more robust first-quarter numbers. Furthermore, Eli Lilly's stock gained traction, driven by enthusiasm surrounding a new daily obesity treatment, while Vistra, having previously benefited from the data center surge, faces challenges this year despite optimistic analyst forecasts. Analysts predict a potential upside for Vistra, as they await developments regarding its agreements with data center operators for nuclear and gas-generated power. The investment recommendations from Piper Sandler illustrate a strategic approach to navigating an evolving investment landscape amidst ongoing market fluctuations.