In the midst of a volatile economic environment, one U.S.-based investment advisor is pushing clients towards an active, factor-based approach to investing that looks at the quality of stocks rather than focusing on broad sectors.

Liz Ann Sonders, chief investment strategist at Charles Schwab, discussed her approach to investing against a backdrop of high interest rates and aggressive monetary policy from the U.S. Federal Reserve and other central banks in the fight against inflation.

“What we’ve been emphasizing is more of a factor based approach than a sector based approach,” she said in a television interview with BNN Bloomberg on Tuesday.

Sonders said “price discovery is back” with higher interest rates, meaning “active management” of investments that looks at the particular qualities of stocks has the potential to do well under current economic conditions.

She suggested people look at factors with a “quality wrapper,” pointing to shorter duration stocks, dividend growers, and companies with cash and little debt.

“We think particularly for the stock pickers, that’s the best way to navigate this ongoing tricky market.”

To avoid pitfalls with this approach, Sonders said investors should keep an eye out for signals like the company’s ability to fund and grow dividends over time and what yields companies have offered in the past.

“You want to combine in those other factors and not just look for dividend yield,” she said.

Sonders posited that it’s “premature” for market watchers to expect major signals on interest rates to come directly from U.S. Federal Reserve Chair Jerome Powell, or read particular data points like jobs reports too closely for clues to the central bank’s next move.

With several major U.S. banks set to report earnings this week, Sonders said she will be looking to see what financial institutions say about the broad economy and consumer resiliency, as well as whether labour costs or layoffs will start to be more widely discussed in the financial sector.