Piper Sandler Urges Shift to Quality Stocks Amid Macro Risks

Piper Sandler published a guide advising clients to prioritize quality stocks as the AI trade fluctuates and the broader macroeconomic outlook worsens heading into 2027. The firm defines quality stocks as companies maintaining high free cash flow yield, high return on equity, return on invested capital, return on assets, and high interest coverage.

Chief investment strategist Michael Kantrowitz argues that decelerating housing activity, elevated oil prices, and rising interest rates will push investors toward stable companies to mitigate portfolio risk. He stated, "We believe we are in a backdrop today that is conducive to quality themes outperforming."

To gain this exposure, the bank recommends using its Macro Select screener, which highlights large-cap companies including Uber Technologies, Salesforce, and UnitedHealth Group. Alternatively, the firm suggests quality-factor ETFs from providers such as iShares, Invesco, JPMorgan, Northern Trust, and American Century.