‘Mag Seven’ component that becomes beautiful even though it is boring becomes a huge hit

Friday deal… Are we entering a new phase of the bull market?

I believe we do. “One size (or group) fits all”, and as we have seen with Big Tech, while immersing yourself in trading can usually work for a while in the market It is by no means a long-term investment solution.

What we now know as the “Magnificent Seven”: Apple (AAPL), Alphabet (GOOG) (GOOGL), Microsoft (MSFT), Amazon.com (AMZN), Meta Platforms (META), Tesla (TSLA), and Nvidia ( NVDA )) has become a “go-to” group for those seeking high-quality growth in uncertain economic times without the economic sensitivities of smaller or more volatile businesses.

This is a parking lot for those who want to participate in the markets but fear that the Fed will push us into a recession or worse with its current interest rate profile.

Friday Action for the Nasdaq Composite Index Compared to the Dow Jones Industrials, the S&P 400 Value Index and the Russell 2000, this may be a harbinger of change as markets become more accustomed to “higher rates for longer.” The current interest rate situation may not be killing the economy. This index includes smaller or economically sensitive stocks.

This is an encouraging sign that a beneficial expansion phase has begun and that the market may have overdone the antidote. It is believed to be a reliable, high-quality growth stock.

diffusion

On Friday, the Nasdaq Composite closed 2.05% lower, the S&P 400 mid-cap index closed 0.39% higher, the Russell 2000 index closed 0.24% higher and the Dow Jones Industrial Average closed 0.56% higher.

Tesla hits a new 52-week high. Market darling Nvidia is down 10%, with the stock entering bear market territory based on its key reversal day high of $974 on March 8 (I mentioned this in my March 11 post).

Netflix is ​​down 9% (down 13% since April 8). The bulletproof problem may unravel as economic sensitivities to everything else become at stake. “mag 7” is not everything.

message

The Fed’s message of “higher for longer” hasn’t killed, and doesn’t seem to be, killing the goose that lays the golden eggs. We have been living at this rate for over a year and employment, wages and the economy continue to grow.

As of the end of 2023, the market capitalization of ‘mag 7’ was $12 trillion, reaching 30% of the total market capitalization of the S&P 500. By comparison, the total market capitalization of the Russell 2000 Index was $3 trillion and the S&P 400 Value Index was only $2.7 trillion.

If you take away the $3 trillion in small-cap and value stocks from the “Great Seven Companies,” the growth potential for the poor increases enormously. This is not to mention the potential for new money to flow to the sidelines in more confident markets. The opportunity to escape the ‘Magnificent Seven’ appears to be very large and still intact.

what do you think?

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