The 'Magnificent 7': Dominating the 2023 Stock Market

The S&P 500 has become increasingly top-heavy, with the "Magnificent Seven" tech stocks (Apple, Alphabet, Microsoft, Amazon, Meta, Tesla, and Nvidia) now accounting for 29% of the index's market cap. This is the largest portion ever dominated by just seven stocks. These tech giants have outperformed the other 493 stocks in the index, with gains of 71% compared to just 6%. Goldman Sachs predicts that the Magnificent Seven will continue to grow at a faster rate than the rest of the index, with higher sales growth, margins, and earnings per share. However, the risk/reward profile of investing in these stocks is not particularly attractive given their already elevated expectations.