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The Magnificent Seven (the nickname for the highest-performing tech stocks) has been driving the S&P 500 higher lately. Funny names like Cowboy aside, the stock’s influence on the market has raised some eyebrows.
First, we’d like to introduce three new stories. atlantic:
Flying too far
The Clash’s classic song “The Magnificent Seven” depicts workers grinding through seven-hour shifts, waiting to be released for lunch and a drink at the pub.
Wave goodbye to the boss
It’s our gain, but it’s his loss
But anyway, the lunch bell rings.
Take an hour and good luck!
The lyrics are an interesting commentary on the monotony of life under capitalism, with references to Friedrich Engels and Karl Marx. In an ironic twist, this punk rock song now shares the same name as the most punk rock phenomenon I know of. Think of the tech stocks that have been leading the market lately.
When the S&P 500 index hit an all-time high last month, it was driven primarily by the “Magnificent Seven” basket of tech stocks, which consists of Meta, Alphabet, Apple, Amazon, Microsoft, Tesla, and chipmaker Nvidia. Thanks to you. The computer powering the AI system has made his chip minting very attractive to investors.as wall street journal wrote this in December. “This is the Magnificent Sevens Market. Other stocks just live in it.”
This nickname has a strange backstory.Michael Hartnett, Bank of America’s chief investment strategist, reportedly coined the nickname after the 1960 film. Magnificent Sevena Western-style remake of Akira Kurosawa’s 1954 film. seven samurai. (The Clash song also alludes to the 1960 cowboy movie.)
The Magnificent Seven has had a disproportionate impact on the market: Joe Rennison says: new york timesThese stocks drove about 60% of the index’s 23% gain last year (their larger market caps mean their growth is weighted more heavily than smaller companies), pushing the S&P 500 higher. . 7 stocks are still strong, but not the monster returns we’ve seen with these tech stocks.
Large market concentrations can pose risks. Hartnett told NPR in late 2023 that, just before the dot-com bubble burst again, a group of flashy tech stocks, coined at the time as the “Four Horsemen” to refer to Dell, Cisco, Microsoft, and Intel, He recalled that he controlled the stock market. He added that the current Star stock was “great because everything else was tragic.” Interest rate uncertainty and global turmoil have made it a difficult year for many businesses. Some analysts, including Mr. Hartnett, believe that over-reliance on a small group of stocks could lead to an economic downturn if those companies fail or prove to be overvalued. I am concerned that there is.
The degree of market concentration we have seen recently is remarkable. By last year, the S&P 500 was the most concentrated it had ever been. But the AI excitement that made these stocks so attractive to investors appears to be fading. And some of the companies in the Magnificent Seven are losing their luster. Meta reported big sales last week, and its stock price soared (Wall Street seemed to reward the company for announcing its first-ever quarterly dividend and $50 billion in stock buybacks). This comes after the company’s “year of efficiency,” which included several rounds of layoffs (cutting thousands of employees). Nvidia continues to be loved by investors. But Tesla has particularly struggled, with its stock plummeting last month. And its founder, Elon Musk, has struggled with his dealings with X, his close personal relationships with Tesla board members and allegations of drug use, and last week’s judge’s ruling that his pay package was out of control. It has been embroiled in several controversies.
Apple, Amazon, Microsoft, and Alphabet all reported solid earnings recently, but their stock prices didn’t rise significantly.As Martin Pearce wrote information Last month, “Rather than the Grand Seven, it might be more appropriate to call this group Nvidia, Meta, and the Humble Five.” Whatever you want to call them, riff on the names of the stocks. I get that you don’t want to expend mental energy on, but their legacy may prove to be less lasting than the song and movie of the same name.
Related:
today’s news
- A federal appeals court has ruled that Donald Trump is immune from prosecution for alleged criminal acts he committed as president after the 2020 election.
- Jennifer Crumbley, the mother of the Oxford High School shooter who killed four students, has been found guilty of manslaughter.
- Chile’s wildfires are likely to be the country’s worst on record, according to the United Nations disaster agency. Chilean authorities confirmed at least 131 people were killed and hundreds more missing.
night reading
“Raina’s magic is real”
Written by Jordan Kisner
If you don’t have children under 16 or are not under 16 yourself, you may not know who Raina is. I was the same. I called a friend with kids and asked, “Do you know a writer named Raina Telgemeyer?”
“Of course,” she said, confused, as if she were asking me if I knew anything about cars.
“It’s like the Beatles for kids,” another parent friend explained.
Read the full article.
See more atlantic
culture break
clock. Tracy Chapman and Luke Combs’ performance of “Fast Car” at the Grammys was a sore throat for our deeply divided nation, writes Peter Wenner.
For now, please move. Calorie measurements on fitness trackers are often inaccurate, so you should move your body “just because you want to,” writes Caroline Mimbs-Nice.
Play the daily crossword.
P.S.
Lest you think Big Tech isn’t punk rock at all, we’d like to draw your attention to the fact that Nvidia’s CEO is known for wearing a black leather jacket. Vanessa Friedman wrote a great article about choosing clothing that isn’t decidedly nerdy. times last year. “A jacket not only symbolizes a person, but it also symbolizes a great leap forward for that person. Wearing the same thing every day has a Pavlovian effect on the collective mind, not just in Silicon Valley. “It’s a shortcut to creating a unique identity in almost any field,” she wrote.
Also in the area of truly treasonous executive behavior, WeWork co-founder and former CEO Adam Neumann is reportedly considering buying the bankrupt company with other investors. There is.
– roller
Stephanie Bai contributed to this newsletter.
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