December’s market performance was all about gains in several of the “Magnificent Seven” tech stocks.
Tesla (TSLA), Alphabet (GOOGL, GOOG), Amazon (AMZN), and Apple (AAPL) all hit new highs on Monday. Even on a day like Tuesday, when all three major indexes were in the red, the Round Hill Magnificent Seven ETF (MAGS) hit an all-time high.
Each stock has its own underlying story at work, such as the relationship between Tesla CEO Elon Musk and Donald Trump that caused a post-election stock rally, but market strategists They believe that broader themes are also involved. “The Magnificent Seven has become a hiding place.” When the direction of the macro story becomes uncertain.
“When you’re concerned about other things in the market and the economy, Mag7 really has the potential to be a ‘protection’,” said Scott Kronert, head of U.S. equity strategy at Citi.
The bias toward large-cap stocks among investors comes as markets anticipate the Federal Reserve’s expectations for the coming year to be lower than previously expected, with signs of weak inflation and solid economic growth. This is because we expect the Bank to cut interest rates even lower.
As of Tuesday, the market had priced in two rate cuts in 2025, one fewer than the market had expected before the Nov. 5 presidential election, and the latest This is significantly different from the four times he initially supported the economic outlook. Released in September.
Kevin Gordon, senior investment strategist at Charles Schwab, told Yahoo Finance that the Magnificent Seven’s rise is “no coincidence” given that the market is pricing in lower interest rate cuts.
“If interest rates stay a little higher for a little longer than consensus expectations, the companies that are reaping the net benefit from rising interest rates are probably going to have a I think the scenario will work out.” Its explanation.
Gordon said the Magnificent Seven and other large-cap stocks have large amounts of cash on their balance sheets and strong quarterly cash flows, making them a safe haven amid interest rate uncertainty. It was pointed out that it was suitable. As Keith Lerner, co-chief investment officer at Trust Co., told Yahoo Finance’s Sheena Smith in April, this could lead to higher borrowing rates that could persist if the Fed pauses rate cuts. Big Tech companies are likely to be less exposed to costs.
Dave Mazza, CEO of Round Hill Investments, said investors are returning to Round Hill’s Magnificent Seven ETF because these companies are on the offensive amid market uncertainty. I believe this is because it is a means of both protection and defense.
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