The "Magnificent Seven" saw substantial declines since their August peaks amid a more challenging macroeconomic landscape. The post The S&P 500 is Down 10% Since August as the Magnificent Seven Struggle appeared first on Tokenist.
But the tech behemoths that fueled that rally have seen significant declines since. The drop was caused mainly by higher interest rates and rising Treasury yields, which pushed investors toward risk-free, fixed-income assets.
S&P 500 Down 10% Since Hitting August’s Peak
The electric vehicle (EV) giant fell around 23% during this period, while Nvidia, Amazon, and Alphabet, lost around 13%, 10.5%, and 7.5%, respectively. The S&P 500 itself plummeted about 10%. The best-performing stock was Microsoft, which slipped just 2.2% over this run.
High yields typically hurt stock prices because they make fixed-income investments like bonds more attractive, leading investors to shift away from stocks, which in turn can decrease stock demand and prices.
Magnificent Seven Fueled Over 50% of S&P 500’s Gains in 2023
Thanks to their strong presence in AI – which has been making headlines countless times in 2023 – the Magnificent Seven fueled over 50% of the stock market’s gains this year.
As a result of this rally, the valuations of these companies had become notably less appealing compared to the first months of the year, when six out of the seven stocks were deemed undervalued, according to Morningstar analysts.
But as the macroeconomic circumstances deteriorated, the valuations of Magnificent Seven companies came under renewed pressure. This trend is expected to continue as long as the current economic conditions persist. However, these stocks have the potential to continue attracting investor interest as mega-cap companies tend to maintain profitability even when interest rates are high, in contrast to smaller stocks.
Where do you think the S&P 500 will end the year, given current market circumstances? Let us know in the comments below.