The gap between the “Magnificent 7” tech giants listed on NASDAQ and the rest of the S&P 500 is widening.
The collective performance of Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL), Amazon.com Inc (NASDAQ:AMZN), Apple Inc (NASDAQ:AAPL), Meta Platforms Inc (NASDAQ:META), Microsoft Corp (NASDAQ:MSFT), Nvidia Inc (NASDAQ:NVDA), and Tesla Inc (NASDAQ:TSLA) has surpassed the gains of the other 493 stocks in the broad market index by more than threefold.
The “Magnificent 7,” also known as Mag7, stocks comprise nearly a third of the S&P 500 by market weighting, and without them the index wouldn’t have delivered nearly as strong a return in 2023 — up 24% over the year.
The SPDR S&P 500 (NYSE:SPY), an exchange traded fund that tracks the index, is also up 24%.
However, isolating the Mag7 from the index reveals a remarkable insight into the powerful influence of these stocks.
The Mag7 is up 75% over the year, while the S&P 493 — the senior index minus the Mag7 — is up just 12%. A difference of 63 percentage points.
Indeed, the 24% return on the S&P 500 this year more than doubles the return on the S&P 493, according to the Kobeissi Letter, posted on X.
“In other words, the Magnificent 7 is up three times as much as the S&P 500 and around six times as much as the S&P 493,” the author of the Letter said.
Despite a strong surge recently in small-cap stocks, appetite for the large- and mega-caps remains high. Data on Friday showed that the SPDR S&P 500 enjoyed its biggest single-day cash inflow on record – raking in $20.8 billion.
Also Read: Small Caps Are ‘Outperforming Everything,’ Analyst Says: This Rally’s Been ‘Years In The Making’
But can they continue this performance?
On Tuesday, Benzinga interviewed Piper Sandler’s chief market technician Craig Johnson, who forecast a sizeable rally for small-cap stocks in 2024, while expecting the large- and mega-caps to get stuck in a “high-level trading range.”
He added: “We’re probably going to end up in a period of consolidation, and we’ll be in this high-level trading range for much of 2024 — an equity stall near the 2022 highs, where your Mag7s become your Lag7s.”
In its monthly Global Fund Manager survey, Bank of America noted that 49% of respondents said that long positions on the Mag7 was the most crowded…
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