The S&P 500 (SPY) soared to new heights in 2024, fueled by the extraordinary performance of the Magnificent Seven stocks.
These seven stocks now make up a record 33% of the index, doubling their share over the last five years. Notably, the Magnificent Seven collective capitalizations exceeded $18 trillion for the first time in history, according to The Kobeissi Letter.
“The group is up 50% year-to-date, nearly doubling the S&P 500’s gain of 28%. At the same time, the remaining 493 companies of the index have returned just 20%. Big Tech is massive.”
– The Kobeissi Letter
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Composing the Magnificent Seven are Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), Nvidia (NASDAQ: NVDA), Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOG/GOOGL), Meta Platforms (NASDAQ: META), and Tesla (NASDAQ: TSLA).
Growth vs. value stocks
Moreover, the disparity between growth and value stocks has reached a 24-year low, according to Jason Goepfert. “Another couple of days like this, and value will hit a 40-year low relative to growth,” Goepfert said.
The analyst highlighted in another post that value stocks declined for ten consecutive days. Historically, such a trend has preceded significant rallies, suggesting potential recovery for underperforming segments.
Despite the bullish trend, investor sentiment is at an extreme level, with optimism not seen in years. After similar periods of extreme optimism, stocks have often struggled, indicating a possible correction ahead, as Sentiment Trader reported.
Moreover, as Finbold reported in early December, the market’s current rally is also buoyed by expectations of pro-business policies from President-elect Donald Trump, though his tariff plans introduce inflationary risks. While historical data suggests rare back-to-back years of over 20% gains might lead to further growth, the high valuations could signal caution.
The S&P 500’s future might hinge on whether the broader market can catch up or if the Magnificent Seven tech leaders continue performing.
Featured image from Shutterstock.
