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Magnificent Seven Stocks to Give Way to Minnows in 2024

Conditions are seen as more favorable for smaller tech stocks

Easing bond yields and lower valuations could support group

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If 2023 was all about the Magnificent Seven on Wall Street, this year is poised to usher in a broader array of winners.

That’s the consensus among investors, with smaller and more diverse companies seen to offer twice the return potential of the broader Nasdaq 100 index, according to data compiled by Bloomberg.

With traders betting on a soft landing and Federal Reserve interest rate cuts, riskier small-cap and unprofitable firms are seen as more attractive. That’s after a year in which Apple Inc., Microsoft Corp., Amazon.com Inc., Alphabet Inc., Nvidia Corp, Meta Platforms Inc., and Tesla Inc. were a go-to trade: regardless of market conditions, they offered both offensive and defensive characteristics.

Last year, “if you didn’t own the top seven or eight stocks, you weren’t able to participate in most of the returns. Investors should be cautious about assuming that’s the way it will be in 2024 as well,” said the chief investment officer at Main Street Research.

  • The mega cap effect on last year’s returns is difficult to overstate.

The Bloomberg Magnificent 7 Price Return Index more than doubled in 2023, contributing to a gain of 54% for the Nasdaq 100 Index.



Source: Bloomberg
Image: Tech stocks