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As we came into 2024, a lot of strategists were calling for a broadening of the stock market rally beyond the Magnificent Seven. Those calls sounded familiar, because we’ve been hearing them for at least the past year.
But the broadening hasn’t really materialized. And now the major averages are hovering at record highs.
Maybe it’s time to put to bed the notion that the rally “needs” to broaden to be sustained.
Info tech and communications services are the two best-performing groups thus far this year. Utilities and energy and consumer discretionary are in the red, among other sectors.
The Seven (or really, Magnificent Six, since Tesla has slumped) has powered forward. Nvidia is still the standout, with a 20% jump this year on top of its nearly 240% rally last year.
That means that once again — but even more so — big-cap tech is responsible for the push to new records. The Magnificent Six have accounted for a whopping 89% of the S&P 500’s (^GSPC) year-to-date return through Monday’s close, according to Yahoo Finance’s Jared Blikre.
Big Tech hasn’t reported earnings yet, so the stocks could take a hit when their numbers and forecasts come out. Both info tech and communications services are predicted to report year-over-year growth in both earnings and revenue, according to FactSet. It’s certainly possible that they won’t be able to meet the lofty expectations implied by the stocks’ run this year.
But that was frequently the narrative around tech earnings last year as well. As the refrain went, how could they possibly continue to gain, given what was being priced in?
And then Meta leaped 194%. Tesla doubled. Amazon soared 80%. Microsoft rallied 57%. Alphabet rose 58%. Apple gained 48%. And Nvidia, as previously mentioned, more than tripled. For some investors, surprise at these numbers amounted to an utter failure of imagination.
None of this is to say the same thing will continue to happen. But it certainly makes one question the idea that it can’t continue to happen.
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A previous version of this story was corrected to fix the number of contributors to the 89% return in the S&P 500 this year.
