Can sizzling Magnificent Seven trade keep powering US stocks in 2024?
By Lewis Krauskopf
NEW YORK (Reuters) — As a strong year in U.S. stocks winds down, fund managers face a potentially consequential choice in 2024: stick with the few massive growth and technology names that have powered equity indexes higher, or take a shot on the rest of the market.
Shares of the so-called Magnificent Seven – Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Nvidia (NASDAQ:NVDA), Meta Platforms (NASDAQ:META) and Tesla (NASDAQ:TSLA) – have individually soared between around 50% and 240% in 2023, making them among the market's most rewarding bets.
Because of their heavy weightings in the S&P 500, the seven were responsible for nearly two-thirds of the benchmark index's 24% gain this year. Not surprisingly, fund managers in BofA Global Research's most recent survey said owning the stocks was the market's «most crowded» trade.
But expectations that the Federal Reserve will cut interest rates next year while the economy avoids recession have awoken other parts of the market in recent weeks. Meanwhile, some investors say the huge rallies in the seven may have left them overvalued or vulnerable to profit-taking.
«When you have seven companies that are huge in the index all going up, that is good for the market,» said Jonathan Cofsky, portfolio manager for the Global Technology and Innovation team at Janus Henderson Investors. «But I think there are probably more opportunities in the rest of the market, depending on rates and the economy.»
Data from the Apollo Group showed 72% of the S&P 500's stocks underperformed the index this year, a record.
However, there are signs the rally is broadening. The equal-weight S&P 500 — a proxy for the average stock — has climbed
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