Can The Magnificent 7 Stay On Top?

The Magnificent 7 stocks¹ continue to capture the focus of investors as these large growth names have outpaced the bulk of global equities. In fact, I wrote about this very subject not too long ago.

Their outperformance is notable because eye-popping returns for top stocks tend to occur before they reach the top of the market. Once there, subsequent returns tend to lag the market. See chart below.

This is a somewhat cautionary tale for investors too heavily concentrated in these stocks, expecting continued outperformance from the Magnificent 7. It’s not to say that these stocks cannot continue to outperform, because they certainly can. However, the odds of this continued dominance are increasingly slim.

Rather than seeking additional exposure to these mega cap stocks, investors should ensure their portfolios are broadly diversified to capture the returns of whatever companies ascend to the top in the future.

FOOTNOTES

1. The Magnificent 7 stocks include Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla.

Concerns or questions about how your investment portfolio will hold up in the current market environment? Contact Financial Synergies today.

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