"Tesla has lost 4.73% so far, Apple is down 4.83%. The collapse of the Mag 7 is important because in the last few years the valuation of those stocks has grown so big that they now form more 30% of the value of the S&P as a whole. It created a situation where even if you bought an S&P 500 exchange-traded fund your results were mostly affected by the Mag 7."
""We see several drivers of healthy deconcentration of the current 'top 10' components persisting," she said in a recent note. "First is relative earnings acceleration. Growth rates are apt to continue to decline for the 'Magnificent Seven' while those of 'the 493' improve. Second, stock-buyback activity among the tech giants is falling as operating cash flow increasingly goes to [AI-related] capex.""
The S&P 500 fell 0.19% while the equal-weight S&P 500 was marginally up, reflecting investors selecting between index winners and losers. The broad market is up 0.48% year-to-date. Only Alphabet and Amazon are positive among the Magnificent Seven, while others including Tesla and Apple are down several percent. The Magnificent Seven now constitute over 30% of the S&P 500 by value, creating concentration risk that has driven fund performance. Wall Street expects deconcentration as high valuations cannot rise indefinitely. Morgan Stanley's CIO cites earnings acceleration among the other 493 stocks and reduced buybacks by tech giants due to increased capex.
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