The decline may be ongoing, and analysts expect earnings to fall further. Throw in a possible peak in inflation, and a combination of factors could be in favor of a certain stock. According to Jefferies, in a research report on July 29, soaring inflation reinforced the hawkish bias of the US Federal Reserve. But the recent decline in commodity prices is bringing relief to the market on expectations of a peak in consumer prices in the US, the bank said. Jefferies said peak inflation will favor one stock: quality stocks. Quality companies are those with stable performance – good balance sheets, modest debt, and steady profitability. “Our study of past periods of falling US inflation expectations suggests that it’s time to focus on quality stocks, which have fallen in price relative to [price-to-earnings] Jefferies analysts wrote. It added. Such stocks are said to be trading at a discount to their fundamentals, such as earnings. ” added Jefferies. In July, the markets saw their first drop in earnings, led by the US and Asia. Most of the key sectors are now facing cuts in consumer services. technology hardware, utilities, and utilities,” said Jefferies. “We believe values will decline amid slowing earnings and a challenging macro environment. Globally, we now prefer quality stocks as recession risks hold, the bank said. : High profitability – return on equity over the next two years and return on invested capital greater than 10% Fair valuation – Price-to-earnings ratio of 12 months less than 25 times Current good cash – companies with positive free cash flow conversions Growth and modification – “relatively better” EPS CAGR FY 2022-2023 (compound annual growth rate of earnings per share) and adjusted earnings for the past three months. Display Apple, Visa, chipmaker Broadcom, retailer Home Depot and Dollar Among global stocks are pharmaceutical giant Roche, carmaker Volvo, IT company Fujitsu and manufacturer TSMC chips.