The Markets
In 2023, we witnessed the phenomenon firsthand in the story of “The Magnificent Seven”.
For movie buffs (and people of a certain age), the name brings to mind the star-studded 1960s film with a reputation as one of the greatest Westerns of all time (you can view the trailer below). The seven gunmen in the film are the reason pundits adopted the moniker to describe seven technology-related stocks that delivered double-digit returns in 2023.
Shares of the so-called Magnificent Seven individually soared in 2023, making them among the market’s most rewarding bets. Because of their heavy influence in the S&P 500, the seven were responsible for nearly two-thirds of the benchmark index’s gain this year, reported the Wall Street Journal. This narrow surge masked a weakness in the overall market in comparison.
As of December 6th, 2023, some 44% of stocks in the index were down for the year. The reason we diversify and have other asset classes is that the same Magnificent Seven in 2022 delivered a less-than-magnificent performance. Combined, they lost 39 percent that year and some were negative 44%. All seven finished 2022 with double-digit losses.
When the headline focuses on a broader time horizon and individual share price performance, the story looks quite different. Three of the Magnificent Seven stocks have a negative average annual return over the last two years, three have a positive return, and one delivered a flat performance, reported Matt Krantz of Investor’s Business Daily.
The Magnificent Seven narrative offers an invigorating story and our placements in the S&P 500 in your accounts benefited. When reading stories about stocks or other investments that are performing well, it’s tempting to jump on the bandwagon and heavily commit all your funds to the hot area. History and data show that there are pros and cons in every decision, so this often is not the best path.