In the mid-1980s, the Asian Tiger markets–Hong Kong, Thailand, Malaysia, Singapore–and maybe South Korea and Taiwan) were beginning to become a powerful economic force. This was due to modernization of US industry under Reagan, with the construction of global supply chains; the rising yen, which caused Japan to shift lots of production into China; and the desire of the Tiger countries to replicate the economic success of post-WWII Japan. This was an important world investment theme that lasted over a decade.
Then there were the BRIC countries–Brazil, Russia, India, China–which Goldman Sachs tried to promote about 25 years ago as successors to the Tigers. Nothing much tied this group together, however, other than they were all big countries and–with the exception of China under Deng–all places international stock market investors had tended to avoid. What was so bad? …unstable governments, hostility toward foreigners, difficulty getting money in and out, and untrustworthy financials. And in 2000, Xi replaced Deng and Putin replaced Yeltsin–both moves that had terrible adverse consequences for Russia and China. Anyway, catchy acronym with no substance behind it.
In today’s world, we have the Magnificent Seven. Pundits are writing/talking about them as if they were an important economic and stock market force that will be the key to how this year plays out, rather than a collection of big companies that did well in 2023.
I think it’s the latter and that a lot of the magnificence of 2023 is a result of their wretchedness in 2022. My rough calculation of 2022 capital change results:
S&P 500 -10%
AAPL -17%
NVDA -20%
MSFT -20%
GOOG -25%
AMZN -30%
TSLA -44%
META -53%.
So the Seven as a group fell about 3x what the S&P did two years ago. TSLA and META each came close to being cut in half. The consensus view toward the end of 2022 was that more economic damage was in store for 2023. It’s understandable, then, that the biggest losers of 2022 would have strong rebounds when that prediction proved far too bearish. META damping down its Metaverse ambitions didn’t hurt it, either.
Why not the Magnificent Ten? Obviously, you’d lose the movie reference …but you’d also have to include some much less glamorous names, like Berkshire Hathaway and a couple of drug companies. So some, maybe a lot, of the sizzle would be gone.
Also, as it turns out, this morning the Magnificent Seven includes BRK.B and not TSLA. AAPL has slipped out of first place to second, as well, on reports that iPhone sales are cooling off.
Anyway, I think we’ll see the effect of changing economic variables in the performance of the Seven. I don’t think they’re the place to look for the cause, however, as I perceive the financial press is thinking.