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Are the Magnificent 7, now 3?

Are the Magnificent 7, now 3?

April 01, 2024

The original Magnificent 7 was a movie released in 1960.  Believe it or not, I was too young to remember the film’s release, but it had a blockbuster cast, had one Academy Award nomination and is considered one of the greatest Western films of all time.

Still, nearly 65 years later, when I mention the Magnificent 7, people still say, “It’s a movie, right? 

But, the Magnificent 7 I am referring is a group of companies in the U.S. stock market. These 7 big tech companies have become dominant players in their respective sectors. 

With the exception of Nvidia, a company that makes special computer parts for AI, the companies are probably familiar to all of us:  Meta (Facebook), Amazon, Tesla, Apple, Microsoft, and Alphabet (Google).

These 7 companies are so big that they make up over 30% of the weighted index of the S&P 500 companies and 40% of the NASDAQ 100, which means when they do well, the indexes do well. 

It appears that for now the 7 is becoming 4 or even 3.

If you invested in just the S&P 500 things could be changing on the short term.  Market performance has begun to broaden to other companies in the index as well as to some of the other indexes, like small-caps and mid-caps.

Some compare where we are today to the tech bubble of 1999, and where fortunes of many undiversified investors were lost in 2020 and 2021.

While there are similarities, there are notable differences.  I will discuss them in a future post.

Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.  

The views stated here are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.