The Magnificent 7 have carried the market, but their days of running circles around the other 493 stocks might be numbered.
In 2023, they flexed with 36% profit growth while the rest of the S&P 500 shrank by 4% — a massive gap. But that gap won’t last forever.
Goldman Sachs sees Mag 7 earnings growth cooling to 33% in 2024, while the rest of the market finally turns positive at 3%. Still a gap, but not as ridiculous.
By 2025, Goldman says, the tide shifts hard — Mag 7’s growth slows to 18%, while the rest of the market surges to 11%. And in 2026, the gap is nearly gone: 16% vs. 13%. Take a look at this chart:
Mag 7 will still lead, but when the market is this concentrated, even a slight pullback in these giants could drag everything down — and we’ve seen this movie before.
The GRANOLAS in Europe last year (GSK, Roche, AstraZeneca, Novo Nordisk, Nestlé, Novartis, L’Oréal, LVMH, ASML and SAP) were a perfect example of how overconcentration can backfire.
Read more: Trump 2.0 tariff barrage sends markets into a tailspin
Despite strong earnings, stretched valuations caught up with them, leading to flat performance and dragging down the entire market.
Maybe it’s time to bet on the 493 underdogs.
Edited by Ankush Chibber. If you have any tips, ideas or feedback, please get in touch: talk-to-us@moniify.com
