The strong performance of the so-called "Magnificent Seven" technology giants is anticipated to moderate in the second half of the year, EasyAssetManagement reports. This potential slowdown could create opportunities for other segments of the market, particularly the equal-weighted S&P 500.
A notable trend has emerged with multi-theme stocks, defined as those appearing in at least four thematic investment universes. These stocks have significantly outperformed both the Magnificent Seven and the broader S&P 500 on an equal-weighted basis. While the Magnificent Seven and the S&P 500 have delivered year-to-date returns of 40% and 5.7%, respectively, the multi-theme universe has surged by 33.2%.
It's important to note that the top performers within the multi-theme universe are not exclusively tied to the Magnificent Seven. In fact, six out of the top seven performers aren't among the tech giants, showing that there are good investment opportunities in various sectors, not just technology. This suggests a broader-based rally driven by diverse thematic opportunities.
S&P 500 Earnings Growth May Broaden Beyond Tech Giants
The S&P 500 is poised for a potential shift in its earnings growth dynamics. After a period dominated by the "Magnificent Seven" tech giants, the remaining 493 companies are projected to experience their first quarter of earnings expansion in over six quarters. This growth is expected to accelerate in the latter half of the year.
Conversely, the extraordinary growth trajectory of the Magnificent Seven, which contributed significantly to the S&P 500's performance, is anticipated to moderate. While these tech giants are still forecast to exhibit robust revenue growth, their earnings expansion is expected to decelerate from the exceptional levels seen in 2023.
This potential shift in the earnings landscape could lead to a broader-based market rally, as investors seek opportunities beyond the high-flying tech sector.
What this means for investors is that they can look into stocks that are involved in multiple areas. Here are a few examples:
- Arista Networks, which specializes in network switches, cloud computing, and data centers
- Broadcom, known for semiconductors, networking, and software
- General Electric, with interests in aviation, healthcare, energy, and financial services, offer diversified exposure.
- Additionally, ServiceNow, focused on cloud computing and enterprise software
- Walmart Inc, spanning retail, e-commerce, logistics, and financial services, present further opportunities to invest in multifaceted sectors.
- Amazon isn't just about online shopping; it also leads in cloud computing (AWS), digital streaming, and AI.
- Another good example is Meta Platforms, which operates in social media, virtual reality, and AI.
- Nvidia also known for its GPUs, gaming technology, data centers, AI, and self-driving cars.
By investing in a mix of different stocks, investors can better manage the changing market and find new chances for growth.
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Any opinions, news, research, reports, analyses, prices, or other information contained within this research is provided by an external contributor as general market commentary and does not constitute investment advice for the purposes of the Financial Advisory and Intermediary Services Act, 2002. First World Trader (Pty) Ltd t/a EasyEquities (“EasyEquities”) does not warrant the correctness, accuracy, timeliness, reliability or completeness of any information (i) contained within this research and (ii) received from third party data providers. You must rely solely upon your own judgment in all aspects of your investment and/or trading decisions and all investments and/or trades are made at your own risk. EasyEquities (including any of their employees) will not accept any liability for any direct or indirect loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on the market commentary. The content contained within is subject to change at any time without notice.
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