A Magnificent Year for the Magnificent Seven
June 20, 2024
It has been a solid first half of the year for U.S. equities, especially big technology companies. The Magnificent Seven —Nvidia, Microsoft, Apple, Alphabet, Amazon, Tesla and Meta — dominated markets in 2023 and continue to lead the advance in 2024. Equating to 35% of the S&P 500 index, these companies can drive the market higher (or lower) depending on their performance.
From the start of the year through June 14, the Magnificent Seven returned 32.5%, or two and a half times the 13.6% return of the S&P 500. These same companies are up 9% month to date, tripling that of the S&P 500. Without the Magnificent Seven, the performance of the S&P 500 falls to roughly 6% year to date and is flat month to date.
So, what’s behind the outperformance? It comes down to strong balance sheets, solid earnings and being uniquely positioned at the center of the artificial intelligence revolution. In fact, consensus earnings estimates for 2024 have significantly outperformed the rest of the market, while net profit margins are roughly double that of the S&P 500. That said, the leadership of this group will likely persist, and we continue to favor U.S. large cap stocks as a result.
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