There has been a significant divergence in the collective performance of the seven companies, suggesting the assumption of their consistent market support may need reassessment.
In 2023, the group of stocks known as the “Magnificent 7” – comprising Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla– significantly influenced the S&P 500, driving its gains to 26% for the year. Excluding these seven, the average market performance was notably lower at 12%.
However, as we progress through 2024, the dominance of these seven stocks appears to be waning. The early part of the year has seen varying results from these companies. Notably, Tesla, Apple, and Alphabet have not maintained their previously stellar performance levels. This shift has led some market analysts to reclassify Amazon, Meta, Microsoft, and Nvidia as either the “Gang of Four” or “Fantastic Four,” distinguishing their continued strong performance from the other three.
International markets, including Japan’s, have performed well or better than the US market during this period. Market breadth was a major concern in 2023, when the majority of index gains seemed to be concentrated in a small group of large-cap growth stocks, especially the Magnificent 7. However, market breadth has been steadily improving since late 2023.
Furthermore, with the expectation of Federal Reserve rate cuts, investors should consider moving away from money market funds. Those waiting for a definitive signal to enter the market, such as the start of a Fed rate-cutting cycle, risk missing significant gains. Historically, waiting for such a signal has resulted in missing an average of 11% in potential returns.
In conclusion, avoid getting swept up in short-term market hype and ensure your capital is well diversified across multiple sectors and asset classes. This will ensure a long-term growth path that will outlast short-term market fluctuations. For more insights visit us here.
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