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The Magnificent Seven, a nickname for top-flying technology stocks, have been boosting the S&P 500 lately. The fun cowboy name aside, the stock's outsize impact on the market is raising eyebrows.
First, here are three new stories from The Atlantic:
Flying too high
The Clash's big song, โThe Magnificent Seven,โ follows a worker working through his seven-hour workday, waiting to be released for lunch and then a drink at the pub.
Say hello bub-bub-bub-bye to the boss
It's our gain, it's your loss.
But anyway, the lunch bell rings.
Take an hour and do your...thank you!
The lyrics are a playful commentary on the monotonies of life under capitalism, with references to Friedrich Engels and Karl Marx. In an ironic twist, this punk-rock song now shares its name with just about the least punk-rock phenomenon I can get. Consider: Tech stocks that have been leading the market lately.
When the S&P 500 hit an all-time high last month, it was largely thanks to the โMagnificent Sevenโ basket of tech stocks comprising Meta, Alphabet, Apple, Amazon, Microsoft, Tesla and chipmaker Nvidia, whose ability to mint the computer chips that underpin artificial intelligence systems has made it extremely attractive to investors. As The Wall Street Journal wrote in December: โIt's the Magnificent Seven market. The other actions simply live in it.โ
The nickname has a peculiar history: Michael Hartnett, Bank of America's chief investment strategist, supposedly coined it in reference to the 1960 film. The seven magnificentsa Western-style remake of Akira Kurosawa's 1954 film, seven samurai. (The Clash song also alludes to the 1960 cowboy film.)
The Magnificent Seven have had a disproportionate impact on the market: as Joe Rennison says noted in The New York TimesThese stocks drove about 60 percent of the index's 23 percent growth last year (their large market caps mean their growth outweighs that of smaller companies), boosting the S&P 500. The index would have risen only 15 percent without the seven: still strong, but not the monster returns seen with these tech stocks.
A significant market concentration can mean risk. Hartnett remembered According to NPR in late 2023, another time a flashy group of tech stocks (then coined the โFour Horsemen,โ referring to Dell, Cisco, Microsoft and Intel) dominated the stock market was just before the bubble burst. of dotcom. He added that the actions of current stars โwere magnificent because everything else was tragic.โ Uncertainty over interest rates, coupled with global turmoil, made for a difficult year for many businesses. Some analysts, including Hartnett, worry that overreliance on a small group of stocks could lead to a slowdown if these companies go bankrupt or become overvalued.
The level of market concentration we've seen lately is remarkable: last year, the S&P 500 was the more concentrated once had been. But AI excitement What made these stocks so attractive to investors appears to be disappearing. And some of the Magnificent Seven companies are losing their luster. Meta reported spectacular sales last week and its stock soared (Wall Street seemed to reward the company for announcing its first quarterly dividend and a $50 billion buyback; that came after their โyear of efficiency,โ which included several rounds of layoffs that cut thousands of employees). Nvidia, for the most part, remains beloved by investors. But Tesla, in particular, is struggling: Its stock plummeted last month. And its founder, Elon Musk, is involved in multiple controversies, including his management of X, accusations about his close personal ties to Tesla board members and drug use, and a judge's decision decision last week that a payment package of his was out of control.
Apple, Amazon, Microsoft and Alphabet recently reported solid earnings, but his actions We didn't see any big surges. Like Martin Peers wrote in Information last month, โInstead of the Magnificent Seven, it might be more appropriate to refer to the group as Nvidia, Meta, and the Humble Five.โ Whatever she wants to call them, and I understand if she doesn't want to spend mental energy looking up names for stocks, her legacy may prove less lasting than the song and movie of the same name.
Related:
Today news
- A federal appeals court ruled that Donald Trump is not immune to processing for any alleged criminal acts he committed as president after the 2020 election.
- Jennifer Crumbley, mother of Oxford High School shooter who killed four students, found guilty of involuntary manslaughter.
- The forest fires in Chile are probably the deadliest on record, according to the United Nations disaster agency. Chilean authorities have confirmed that at least 131 people have died and hundreds are missing.
night reading
'Raina's magic is real'
By Jordan Kisner
If you do not have a child under the age of 16, or you are not under the age of 16, you may have no idea who Raina is. That's how it was with me. I called a friend who had kids and said, "Have you heard of an author named Raina Telgemeier?"
โOf course,โ she said, sounding bewildered, as if he had asked her if she was familiar with the car.
โLike the Beatles for kids,โ another parent friend explained.
More of The Atlantic
Cultural break
Look. Tracy Chapman and Luke Combsโ โFast Carโ performance at the Grammys was a balm for our deeply divided nationwrites Peter Wehner.
Move, just because. Calorie measurements on fitness trackers are frequently inaccurateso you should move your body โsimply because you want to,โ writes Caroline Mimbs Nyce.
Play our daily crossword puzzle.
P.S.
Lest you think that Big Tech isn't punk rock at all, I'll draw your attention to the fact that Nvidia's CEO is known for sporting black leather jackets. Vanessa Friedman wrote a surprising article about the decidedly non-nerdy clothing choice in the Times last year. โThe jacket is an object that has become a signifier, of a person, but also of the great leap forward that that person represents... Wearing the same thing every day is a shortcut to creating a Pavlovian identity in the hive mind , not only in Silicon Valley but in practically any field,โ he wrote.
Also, in the realm of truly renegade executive behavior: Adam Neumann, co-founder and former CEO of WeWork, is reportedly considering buying the now bankrupt company, along with other investors.
โLora
Stephanie Bai contributed to this newsletter.
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