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7 stocks drive the S&P 500s recent run up?

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It’s the Magnificent Seven’s Market. The Other Stocks Are Just Living in It.

Big tech stocks have jumped 75% in 2023—and now make up about 30% of the S&P 500

By Hardika Singh, WSJ

Dec. 17, 2023 7:00 am ET

Big tech stocks reclaimed their position as the market’s leaders this year. Just how far ahead of the pack have they run?

Collectively, the stocks known as the Magnificent Seven—Apple, Microsoft, Alphabet,, Nvidia NVDA 1.12%increase; green up pointing triangle, Tesla and Meta Platforms—have jumped 75% in 2023, leaving the other 493 companies in the S&P 500 in their dust. (Those have risen a more modest 12%, while the index as a whole is up 23%.)

The Magnificent Seven stocks have swelled to represent about 30% of the S&P 500’s market value, according to Goldman Sachs Global Investment Research. That is approaching the highest-ever share for any seven stocks.

“It’s a mind-blowing number to me when I think about an index that’s supposed to represent such a broad group of companies,” said Ann Miletti, head of active equity at Allspring Global Investments, of the wide outperformance gap.

The influence of the big tech stocks is massive on a global scale, too. Within the MSCI All Country World Index—a benchmark that claims to cover about 85% of the global investible equity market—the combined weighting of the Magnificent Seven is larger than that of all of the stocks from Japan, France, China and the U.K.

Investors and strategists have long raised concerns about market concentration. When just a handful of stocks are responsible for most of the market’s gains, it becomes more vulnerable to a downturn if a few heavyweights fall.

Those worries appeared prescient last year when big tech stocks tumbled as the Federal Reserve began raising interest rates. When rates were near zero, investors chased the robust returns offered by tech and other growth stocks, but when rates started rising, those shares suddenly faced competition from less-risky investments.

The Magnificent Seven finished 2022 down 40%, losing $4.7 trillion in combined market value, whereas the remaining stocks in the S&P 500 dropped 12%.

Most investors expected more of the same in 2023. Instead, big tech embarked on a furious rally that overcame a banking-sector crisis, worries about a government debt default and wars in the Middle East and Europe.

Behind the blockbuster gains? Artificial-intelligence hype took Wall Street by storm, bolstering hopes that these companies would generate windfall profits in the future. Plus, strong economic data, coupled with easing inflation, powered bets that interest rates have peaked, providing tech stocks another boost.

Microsoft has rallied 55% in 2023, with shares setting record highs in November. Apple has added 52% and in June became the first U.S. company whose valuation eclipsed $3 trillion. Nvidia shares have more than tripled, pushing its market value above $1 trillion.

Historical average

Few other stocks have kept pace. Although the S&P 500 is just 1.6% from its January 2022 record, only 23% of the stocks in the index are within 10% of their record highs, according to Dow Jones Market Data. That is below the historical average of 28%.

Magnificent Seven

The Magnificent Seven deserve credit for the market’s earnings growth as well. Earnings among companies in the S&P 500 are expected to tick up 0.7% this year. Without their contribution, earnings would be on track to fall 4%, according to FactSet.

Some analysts say they don’t expect tech stocks’ dominance to extend into next year, betting instead that beaten-down sectors such as industrials, materials and transportation will outperform.

Matt Orton, chief market strategist at Raymond James Investment Management, recommends that investors boost their positions in selective small-caps and emerging markets, which he predicts could benefit from a falling dollar and lower interest rates.

“You probably, hopefully, will not have the same sort of roller coaster of emotions that we have had, going forward,” Orton said. “We have moved to a little bit of a more normalized market environment where some of the stuff that hasn’t worked for a long time finally starts to work again.”

Some of the big tech stocks still haven’t recovered from last year’s beating. Amazon, Alphabet, Meta and Tesla are trading below the levels where they ended 2021.

Investors appear cautious as well. Although they added a net $4.1 billion to tech-focused equity mutual and exchange-traded funds through November this year, that was about half of the about $7.9 billion that they pulled through the same period in 2022, Refinitiv Lipper data show.

Which stocks do you expect to perform well next year? Join the conversation below.

Michael Rosen, chief investment officer at Angeles Investment Advisors, said one reason that tech stocks have come roaring back is that higher interest rates have helped them earn yields on cash for the first time in decades. That has strengthened their balance sheets and helped them churn higher profits.

“Interest rates just don’t matter as much as profits matter,” Rosen said. “Where are the profits being generated? Because that’s what I want to own.”

Tech stocks still look expensive compared with the broader market. Nvidia is trading at 25 times its projected earnings over the next 12 months, while Microsoft’s multiple is 31 and Apple’s is 30. In comparison, the S&P 500 trades at 19 times future earnings.

Nancy Tengler, chief executive officer and chief investment officer at Laffer Tengler Investments, said it is worth paying up for tech stocks because they can outperform during periods of higher interest rates.

“Everybody comes back to valuations, ‘Oh, but they’re so expensive,’” Tengler said. “But they’re not. In a slowing economic environment, you want to be invested in reliable growers. These are the kind of companies that deliver.”

Alana Pipe contributed to this article.

Write to Hardika Singh at

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