Chart of the Week - A Change is Gonna Come

Welcome to the Chart of the Week.

This week’s chart highlights the increasing earnings growth expected from the rest of the US stock market, a significant trend in light of the dominant influence of the ‘Mag 7’. The ‘Magnificent 7’ are seven high-performing and influential companies at the forefront of sectors such as artificial intelligence, cloud computing, online gaming and cutting-edge hardware and software. These companies, including Microsoft, Amazon, Meta, Apple, Alphabet, Nvidia and Tesla, wield significant power in the US stock market, shaping its trajectory and performance.

Although the overall S&P 500 expected forward growth rate of 12% is a little different to the 11% of the last 12 months, there is a rebalancing taking place: Mag-7 growth has fallen from 54% to 27%, while the rest of the S&P 500 is seeing growth accelerate from 3% trailing to 9% expected.

In 2023, a few stocks, such as the Mag 7, contributed to outsized returns for the Nasdaq 100. While the equity commentary has been focused on the strong growth of the Mag 7, it’s important to note that the rest of the S&P 500 has also delivered solid Q1 results. In fact, 40% of stocks have high earnings, a significant figure that should not be overlooked. As you can see below, this is leading to more balanced performances, not just in the US.

A gradual normalisation of the US economy and labour market suggests that interest rates will soon start normalising slowly. We think this will keep the bull market intact and lead to more balanced portfolio gains. While we still like tech, we’re seeing opportunities elsewhere. If you would like to know more, let us know.

Takeaway: We use industry-leading research to assist our investment process and stay informed.

Did you know: Who would have thought that Raspberry Pi, the maker of the tiny, cheap, single-board computers, would become a public company? Click here.

Marlborough Podcast: This week, we discuss the ECB’s interest-rate cut, market movements and NVIDIA’s rise. Click here.

Marlborough Blog: Andrew Shaw, our Japanese analyst, unveils why we are overweight Japan. Click here.

Author: Nathan Sweeney, CIO Multi-Asset, Marlborough Group

Marlborough Multi-Asset Investment Team, Absolute Strategy Research, Edward Jones, Tech Crunch

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Author: Nathan Sweeney, CIO Multi-Asset, Marlborough Group

Marlborough Multi-Asset Investment Team, Absolute Strategy Research, Edward Jones, Tech Crunch

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