The “Magnificent 7” and the Dangers of Stock Market Hype

Posted on July 30, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Vitaliy Katsenelson CFA

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The Magnificent 7 and the Dangers of Market Hype
You can also listen to a professional narration of this article on iTunes & online.
Despite the S&P 500 showing gains in the mid-teens, the average stock on the market is either up slightly or flat for the year. Most of the gains in the index came from the Magnificent 7 stocks, which constitute 35% of the index! The equal-weighted index, where the Magnicent 7 have only a 1.4% weight, is up only about 4% this year (as of this writing). 

The Magnificent 7 are starting to look like the Nifty Fifty stocks from the 1970s (Kodak, Polaroid, Avon, Xerox, and others) – stocks you “had to own” or you were left behind – until all your gains were taken away or you faced a decade or two of no returns. Forty years later, it’s easy to dismiss these companies as has-beens. They’ve all either gone bankrupt or become irrelevant.

But back then, they were the stars of corporate America, just like the Magnificent 7 are today.
As an investor, it’s crucial to know which games you play and which ones you don’t.

Let me explain: The Magnificent 7 and the Dangers of Market Hype

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