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We will examine today how Magnificent 7 performed last year, individually and collectively compared to the rest of the market.
Recent Magnificent 7 Performance
In the last newsletter, we examined the growth of Magnificent 7 in the last two decades.
Let us focus now on recent performance.
The chart below shows the stock performance of Magnificent 7 in the last 2 years, compared to the S&P 500 returns.
The cumulative return of Magnificent 7 was >4X larger than that of the remaining 493 companies in the S&P 500 Index, while the latter was still impressive.
The slope of return of Magnificent 7 was much steeper than that of other companies in the S&P 500 until the summer of 2024, and then it decelerated.
We warned a few times about that potential in June and July 2024.
A natural question to ask is why the Magnificent 7 stocks performed much better until Jul’24 and then slowed down. We will examine that next.
The chart below shows 12-month trailing earnings growth and consensus estimates for Magnificent 7, as of Q4’24.
The dramatically better earnings growth was justified in part by the stock performance of Magnificent 7.
The slowdown of price increases from the summer of 2024 can be explained by at least some investors getting early estimates of decelerated earnings growth next year.
Of course, there is another part, which is AI mania by both retail and institutions that may have contributed to excessive valuations.
Excessive valuations are almost always corrected. Reduced growth expectations, especially when accompanied by some disappointments relative to the consensus, may lead to re-evaluation and significant price correction.
Ultimately, each stock is evaluated on its own merits, and it is helpful to examine the performance of individual stocks.
The 2024 performance of these seven stocks is shown in the chart below.
It is evident that there was a distribution in most of these stocks since Jul’24.
Last summer we specifically warned about MSFT, NVDA and AAPL.
TSLA was an exception, but it is experiencing a price correction now.
We also mentioned that TSLA and AMZN may beat their drum.
For TSLA, we were even more specific and accurately predicted the low and high for 2024, as mentioned in the last newsletter's Premium content.
In the next few newsletters, we will analyze some of these stocks similarly to last summer.
To continue reading about Market Summary, US Markets, Elliott Wave and Technical analysis of US Markets, volatility, as well as commodities, bonds, forex, currencies or crypto, upgrade to Premium Pro. . .
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