According to the internet, Michael Hartnett, the well-known Bank of America strategist, was the first to use the term “Magnificent Seven” last year to describe a group of leading large-cap stocks (Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla) in the US market. The term has captured the fancy of reporters in the financial media, bringing Mr. Hartnett considerable publicity.
Media personalities are making frequent use of the term, sometimes shortened to “Mag Seven,” because it’s a way of signaling or validating their supposed insider status–a sign that they have deep contacts in the professional investment community and/or that they themselves have knowledge and skills equal to those of the first rank of professionals. It’s a bit like sports play-by-play announcers whose credentials are validated by the former players who sit in the booth with them–except that the financial markets personalities seem to be making the (questionable? highly dubious?) claim that they are/have been/could be players themselves.
What do market professionals get out of all this? That’s the weird thing, to my mind. The track record of an investment firm or a star manager means far less when individuals are trying to figure out who to trust to manage their savings than a financial media endorsement–meaning either an appearance on a financial markets show or even a mention of the manager/firm name in media commentary. This is sort of like going to a Dodgers game, not because of Shohei Ohtani or the team’s many other stars, but because the local TV sports reporter suggested you take a game in.
Still, it’s the case, and the reason that finding a good catchphrase is a weird, but important, part of the retail investment management business.
Do these catchphrases always work out? The answer here is clearly “no.” This is perhaps easiest to see with the 2001 coining of “BRICs,” the quartet of emerging economies Brazil, Russia, India and China. I have no direct experience with Brazil. The other three, however, have histories of not being welcoming to foreign portfolio investors. You may have to own proxies rather than actual share themselves. Financial reports don’t really reflect what’s going on in companies. And the firms offered as investments for foreigners are just as likely as not to have already been rejected by locals. All in all, a hot mess. Owning government debt in these places may have been a better choice than equities–I don’t know. And the BRIC countries themselves did adopt this as a name for their own multinational organization. But the coolness of the term BRICs hasn’t meant these have been great places to put your equity money.