Will the ‘Magnificent Seven’ remain magnificent?

A lot has been said and written about the dominance of the US sharemarket by the “Magnificent Seven” mega technology stocks that have driven the market to record levels. Should a reliance on such a narrow slice of the market be a concern for investors?The New York FANG index, which largely reflects their performance, has surged almost 85 per cent over the past year and is up nearly 13 per cent so far this year.

That’s probably because they are highly cash-generative. Not only do their cash flows fund their operations and capital investment, but most of them have hefty cash reserves that benefit from higher interest rates. Apple, for instance, was holding $US73 billion of cash and liquid assets at December 31.The 10 largest companies by value in the US market now account for more than 30 per cent of the S&P 500’s value, which Goldman says is the highest level since 1980.

While the biggest stocks in the US market are much bigger as a share of the market than in the dot-com bubble of 2000, valuations today are much lower than in that episode, the “Nifty 50” era in the US or Japan’s bubble in the 1980s.In terms of forward price-earnings multiples, the Magnificent Seven trade on about half the multiples of the seven biggest stocks ahead of the dot-com crash. They are far more profitable and have far stronger balance sheets.

That share of global equities slumped to less than 30 per cent in the late 1980s when, at the peak of Japan’s sharemarket and economic bubble, Japan had the biggest market and the four biggest companies and six of the top 10 in the world. For the sceptics, Goldman does provide some comfort in responding to whether the high levels of concentration in the market pose a big risk.

Australia Latest News, Australia Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

Will the ‘Magnificent Seven’ remain magnificent?Apple, Nvidia and other tech giants have driven Wall Street to record levels. That could turn into a problem.
Source: brisbanetimes - 🏆 13. / 67 Read more »

Magnificent seven: Lessons from BlackRock’s Australian quant king Andrew AngBlackRock’s Australian-raised super-quant on why factors may explain almost everything there is to know about beating the market.
Source: FinancialReview - 🏆 2. / 90 Read more »

Media Observed: Seven East versus Seven West over Stokes’ The NightlyIf the Anthony De Ceglie-led digital newspaper The Nightly falters, prepare for a long slow death. If it succeeds, Seven’s power shifts west.
Source: FinancialReview - 🏆 2. / 90 Read more »

Buybacks: Mega-cap tech forecast to drive S&P 500 buybacks: Goldman SachsFourth-quarter filings show the magnificent seven is currently authorised to repurchase almost one-third more of their own shares in 2024 than in 2023.
Source: FinancialReview - 🏆 2. / 90 Read more »

Asbestos-contaminated mulch confirmed at seven more Sydney sitesAn Aldi supermarket, a Catholic school, a kids&x27; sports centre and public pathway near a light rail station are among the new infected locations
Source: 9NewsAUS - 🏆 10. / 72 Read more »

More than seven million struggling Aussies hung up on by Centrelink7NEWS brings you the latest local news from Australia and around the world. Stay up to date with all of the breaking sport, politics, entertainment, finance, weather and business headlines. Today's news, live updates & all the latest breaking stories from 7NEWS.
Source: 7NewsMelbourne - 🏆 18. / 59 Read more »