Can the ‘magnificent seven’ stocks return to market dominance? Investors are divided

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Hedge funds hold record exposure to Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla and Meta, but the grouping has been underperforming of late

Elevated valuations mean strong earnings growth is needed to continue to power the tech rally, says market strategist Ed ClissoldHedge funds can’t get enough of the so-called magnificent seven stocks that have dominated this year’s stock market, but other investors are becoming more cautious.

According to Goldman Sachs, hedge funds hold record exposure to the aforementioned grouping: Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla and Meta. While the seven stocks have been responsible for roughly three-quarters of the S&P 500′s 2023 gains, things have lately got trickier, with the grouping underperforming the S&P 500.That’s not unexpected in a market pullback – often, big winners give up ground in corrective periods, only to soon resume their leading role.

Ned Davis Research’s Ed Clissold recently noted that even after the recent pullback, the eight biggest tech stocks accounted for 28 per cent of the S&P 500 but just 18 per cent of index earnings.

 

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