Tuesday, January 2, 2024

The magnificent seven versus all the rest - what will drive 2024 returns?

 





2023 was all about the "magnificent seven", those highflyer stocks that dominate the SPX index (AAPL, AMZN, GOOG GOOGL, META, MSFT, NVDA, and TSLA). The ratio of the mag 7 to the Pax moved from about 2 at the beginning of the year to a high of 3.5 at the end of November to the current level of 3.37. Can this continue? Increasing valuation will be difficult but we must look at what is happening to the rest of the SPX. The equal-weighted index returned about half the market cap weighted SPX. If we have a market correction, it is not clear that the mag 7 will be the driver or the place to hide. 

The SPX benchmark will be driven by the mag 7, so any view on what will happen to equities should include a specific view on this large cap subindex. 

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