Editor’s note: This is not investment advice
The stock market is reaching new heights, with the S&P closing at 5,000 points for the first time. The dominant stocks, called the “Magnificent Seven”, are all in the tech sector and have been driving up the stock market. In turn, mutual funds and ETFs that individuals and pension groups hold have been soaring with them.
Apart from tech stocks, other major players in the S&P are healthcare companies like Eli Lilly and UnitedHealthGroup, and financial firms like JP Morgan. Market Watch says:
Many stock investors feared last year that companies with a disruptive impact on technology would continue to underperform, due to higher interest rates and a weaker macroeconomic backdrop. This uncertainty created a unique entry point for investors into some of the most interesting parts of the innovative tech ecosystem, particularly in software and semiconductors.
Excitement around generative artificial intelligence (AI) dominated U.S. equity-market sentiment and wealth creation in 2023. The greatest winners were the “Magnificent Seven” tech stocks — Apple, Microsoft, , Alphabet, Amazon.com, Nvidia, Meta Platforms, and Tesla — which experienced huge share-price gains and drove 70% of the absolute performance of the Nasdaq Composite Index last year. This price return was not only extraordinary but warranted: earnings per share for these companies rose at least 50%.
While the stock value for these companies have been going up, the Federal Reserve rates are still higher than usual. Tech companies have been trimming some of their divisions, especially with the advent of AI. Investor’s Business Daily continues:
Microsoft, Meta and Nvidia stock all make this screen that showcases companies garnering exceptional institutional demand. The list highlights seven stocks with inflows of at least $1 billion from the best mutual funds.
In addition to these three Magnificent Seven stocks, Uber Technologies (UBER), Fair Isaac (FICO), Arista Networks (ANET) and Fiserv (FI) also make the billion-dollar club.
Market capitalization is important, especially when it comes to Americans’ retirement and their 401Ks and IRAs. However, there are still signs that unemployment could rise soon.
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