The Magnificent Seven, the title of the 1960 remake of the Kurosawa film The Seven Samurai, has been repurposed by the financial press to describe the performance of the largest market cap stocks in the S&P 500 this year. 

The stocks in question, with approximate index weightings, are: Apple (7%), Microsoft (7%), Alphabet (3.9%), Amazon (3.5%), Nvidia (3%), Meta (2%), Tesla (1.7%). Together they make up just north of a quarter of the S&P 500 market cap …but also the lion’s share of the index performance in 2023.

S&P has up-to-date figures for the top 10, which is close enough (for me, anyway) to illustrate the “magnificent” point, which is:  the index as a whole is up by about 25% ytd through yesterday. The top ten, which make up a third of the index, are up by 64%. Putting this last figure a different way, the top ten account for 21 of those 25 points. This means the other 490 stocks in the index account for 4, that is, they’re up as a group by about 6%. 

What are the chances of a repeat in 2024 of the 2023 script? 

Well, NVDA has tripled based on its central importance for AI, and META and TSLA, both bouncing back from ugly 2022 performances, have more than doubled. Just off the top of my head, it seems to me that chances of a similar performance in 2024 are pretty low. Three reasons: trees don’t grow to the sky, as they say; we can already see the market broadening out and increasingly using valuation as a way of sorting wheat from chaff–so the Seven aren’t the only game in town; and, as just mentioned, neither the performance of META nor TSLA remain so “magnificent” if we consider the deep 2022 hole they were working their way out of.

more on this tomorrow