The S&P 500's 2024 rally heavily relied on the performance of the 'Magnificent 7' tech companies, despite attempts to diversify away from these giants.
Despite attempts to diversify away from megacap tech, Wall Street continues to heavily rely on these companies. The S&P 500 rose approximately 23% between the start of 2024 and December 19th. Bespoke Investment Group found that the 'Magnificent 7' — a group encompassing high-performing companies like Nvidia, Microsoft, Apple, and Meta Platforms — contributed 13.7 percentage points, or over half, of that total gain.
Following 2023's year where tech-driven the broader market recovery, investors questioned if the bull market could expand and involve other sectors. Although smaller stocks experienced brief periods of outperformance, Bespoke's data highlights that the 2024 rally ultimately depended on Big Tech. While there were reasons to believe other stocks could outperform due to the Federal Reserve's interest rate cuts and Donald Trump's presidential election victory, these expectations were dampened this month. While the tech-heavy Nasdaq Composite continued its upward trajectory in December, the blue-chip Dow Jones Industrial Average and broad S&P 500 retreated by more than 5% and 2%, respectively. The small-cap focused Russell 2000 plunged nearly 8% during that period. Moreover, the Nasdaq's year-to-date outperformance further emphasizes the exceptional strength witnessed within tech and other growth-oriented companies this year. At times, discussions arose about the market becoming even more concentrated. The 'Fab 4' was considered a potential replacement for the 'Magnificent 7' as Apple, Alphabet, and Tesla displayed signs of weakness earlier in the year. However, all 'Magnificent 7' stocks are on track for gains, although the magnitude of annual returns has varied considerably. Artificial intelligence giant Nvidia has spearheaded the charge in 2024 with a surge of approximately 175% as of Tuesday morning, making it the third biggest gainer in the entire S&P 500
TECH STOCKS WALL STREET S&P 500 INVESTMENT BULL MARKET
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