From Dow Jones & Company:



In 2023, a new bull market began, characterized by extreme speculation and a dominance of large-cap technology stocks, referred to as the “Magnificent Seven”. This has led to a historically narrow market, with investors rejecting diversification and taking concentrated positions in fewer stocks. Despite this, small-cap stocks, cyclicals, industrials, and non-U.S. stocks are showing signs of life and poised for catch-up. The Russell 2000, a small-cap benchmark, has surged more than 12% in December compared to the S&P 500’s 4.1% advance. Additionally, early signs of broadening out are being observed. However, the narrowness of the market has led to a situation where individual stock performance is less impactful than market cap. The dominance of the “Magnificent Seven” doesn’t mean that those individual stocks have been the sole winners in 2023. While Nvidia and Meta have seen large gains, Apple has only had a 49% gain despite its $3 trillion market cap, and some stocks have seen losses. Moving forward, investors should aim for maximum diversification. The economic outlook and interest rates are providing clarity for the rest of the market to play catch-up. The potential for a scenario where the rest of the market catches up without highfliers losing ground is possible. Therefore, the narrow market dominance of the “Magnificent Seven” does not automatically mean that other stocks are due to falter.



Original: The Magnificent 7 dominated 2023. Will the rest of the stock market soar in 2024?