A small group of US stocks, dubbed the Magnificent Seven, continues to dominate returns in global markets. As seen in the chart above, nearly half of the gains in the MSCI All Country World Index for the first six months of 2024, and all of the gains in the second quarter, came from just these seven stocks.
The phenomenon is not new, although it has become more extreme this year. The Magnificent Seven has accounted for about a third of the index’s return since the end of 2022:
The significant outperformance of the Magnificent Seven has skewed style factors, particularly growth.
The chart above shows that when looking at these seven stocks in isolation, growth clearly outperforms: The fastest-growing members of the Magnificent Seven—those represented by the first quintile in the gray bar to the left—rose nearly 12% in the second quarter, an 875-basis-point (bp) lead over the second growth quintile, and a 1,200-bp lead over the slowest-growing quintile on the far right of the chart. Now, let’s look at the MSCI ACWI Index without the impact of the Magnificent Seven. As the orange bars show, growth still outperforms, but not by much. When stripping out those seven stocks, the index’s top quintile of growth gained just 4%, compared to a 3% overall return across all quintiles. ∎