Magnificent Seven could be the second-most-capped index globally
A recent Stocklytics.com analysis suggests that the Magnificent Seven could be the second-most-capped index globally. The septet’s $13.1 trillion cap is second only to that of the American equity market.
What’s telling is that the bunch is more valuable than some of the world’s most traded stock markets. Their collective value, for instance, outstrips China’s total stock market cap by $1.6T. Again, their market share equals the combined sum of three other markets: Japan ($6.5T), India ($4.4T), and France ($3.2T).
Impact on American Economy
The data caught the attention of Stocklytics financial expert Edith Reads. She says the findings underlie the significance of Mag 7 to the American equity market and the indices that list them. Reads stated:
The Mag 7 are your biggest stock picks globally. The fact that they’re more valuable than whole country bourses underscores their importance to the S&P 500 and Nasdaq exchanges that list them.
These stocks constitute a quarter of S&P 500 value and over 50% of Nasdaqs. As such, Reads quips that their dominance has been central to the growth and stability of the US stock market. Her stand mirrors several other analysts who’ve commented on the heptad’s impact on the country’s inflation.
Are They a Bubble in Waiting?
The Mag 7’s impressive returns in the past few years have raised concerns about their concentration in the stock market. Some commentators have also claimed they have all the markings of a bubble. But are they?
According to Smead Cole, they are the CEO of Smead Capital Management. The portfolio manager believes that the current situation echoes the nifty fifty bubble of the 1970s. In that debacle, 50 blue-chip stocks sank as inflation and interest rates rose.
Smead suggested several reasons for his conclusion. First, the stocks in question now are fundamentally solid, as was the case then. Additionally, the Mag-7 has high valuations, like the nifty fifty. Finally, Smead draws parallels between the current inflationary environment and the 1970s.
What Bubble?
However, a JP Morgan assessment paints a more favorable picture. In its recent analysis, the firm seeks to ease concerns regarding a potential bubble, asserting that valuations of the Magnificent Seven relative to the overall stock market remain modest.
While acknowledging concerns over the mega-cap stocks’ robust performance, their analysis noted that they are overpriced. Additionally, it held that the septet would ride slowdowns better than traditional cyclical.
Stocklytics
Graphics: Adobe Stock, Roman
