Tech and digital stock diversification beyond big seven 2023 🌐 | LGT
The article, “The Magnificent 7 dominated 2023. Will the rest of the stock market soar in 2024?” by William Watts, discusses the dominance of megacap technology stocks, termed the Magnificent Seven, in the 2023 stock market rally. Despite year-end gains by the broader S&P 500 index, these tech stocks, including Apple, Microsoft, Amazon, Nvidia, Alphabet, Tesla, and Meta, contributed significantly to the market’s 26% total return. However, concerns arise about the narrowness of this rally, reminiscent of the late-1990s tech bubble, as it raises questions about overreliance on a limited number of growth stories.
Richard Bernstein, CEO of Richard Bernstein Advisors, suggests that the end of extreme speculation sets the stage for investors to explore once-in-a-generation opportunities beyond the Magnificent Seven. He advocates for diversification into small-cap stocks, cyclicals, industrials, and non-U.S. stocks. Signs of a broadening market are noted in December, with small-cap benchmarks showing positive momentum.
The article highlights the peculiar nature of the 2023 rally, with megacap tech stocks outperforming while the rest of the market lagged until recently. Analysts discuss the potential consequences of solely chasing the index and debate the likelihood of a scenario where the broader market catches up without adversely affecting high-performing megacap stocks in 2024.
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