December’s market rally was fueled by several members of the “Magnificent Seven” tech stocks, with Tesla (TSLA), Alphabet (GOOGL), Amazon (AMZN), and Apple (AAPL) hitting all-time highs. . Despite Tuesday being a down day for the major indexes, the Round Hill Magnificent Seven ETF (MAGS) managed to reach new highs. Yahoo Finance notes that these tech giants have become a safe option for investors during times of economic and market uncertainty.
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Market strategists, including Citi’s Scott Kronert, say investors are betting on the Magnificent Seven as expectations for rate cuts in 2025 have now fallen from four expected in September to two. He claims to think that is a safer bet. In addition, Charles Schwab’s Kevin Gordon told Yahoo Finance that the company’s strong cash flow and minimal exposure to borrowing costs will allow it to survive in an environment where interest rates remain high for an extended period of time. He said he is tolerant.
In fact, large-cap tech stocks play both a defensive and growth role due to their ability to grow despite interest rate uncertainty. Kronert even used the phrase “defensive growth” to describe Magnificent Seven stock. It also helps that these companies have good near-term prospects for up to two years. This is definitely what investors need when most other factors paint an uncertain picture.
Meeting expectations is not enough
But Kronert noted that the problem with these stocks could be what investors think will happen in two years. In fact, he believes the market is starting to price in the idea that large-cap tech companies will continue to deliver solid results beyond this period. As a result, he warned, it’s not enough for Magnificent Seven to simply meet expectations.
Which Magnificent Seven stocks are the best buys?
Overall, analysts expect NVIDIA stock (NVDA) to have the most upside potential, as it has a price target of $177.14 per share. This represents an increase of more than 35% from current levels. On the other hand, they are the least excited about Tesla, as its price target of $287.10 per share implies a decline of more than 40%.
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