What ARE the Magnificent 7 and How Did they Affect Returns in 2024?

Financially, 2024 was a pretty amazing year. It was the second year in a row that the S&P500 was UP over 20%. In December, the S&P500 was down 2.5% but, fortunatley, it ended the year UP with a return of 23.31%.

The S&P500 had 57 new highs during the year, ranking 6th in index history.  In 2024, the Dow Jones Industrial Index lost 5.27% for the month of December, yet it was up 12.88% for 2024. Why such a big difference???

It comes down to 7 stocks which have become known as the Magnificent 7. 

This refers to a group of large tech companies including Apple, Microsoft, Alphabet (Google), Amazon, Nvidia, Meta Platforms (Facebook), and Tesla. (The Dow only has Apple and Microsoft in its collection of 30 stocks).

As for the Magnificent 7, the group accounted for 53.1% of the S&P 500’s 2024 total return. This means that the S&P500 return would have been 11.75% without them. This is kind of amazing! There have been other periods of time where a small group of stocks dominate an era. These are great companies but at some point their dominance will end.

When you look at the remaining stocks in the index, you can see that they are doing OK, but not great. The dominance of these 7 stocks can continue for a long time but it also increases the volatility.

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