Stocks: The ‘Magnificent 7’ are fading, and Wall Street seems pleased about it

Market Update: The S&P 500 Trends

Yesterday, the S&P 500 dipped by 0.19%. Interestingly, the “equally weighted” version of the S&P 500, which treats each stock the same, saw a slight increase. This shift indicates that investors are making more selective choices between high-performing and lower-performing stocks, particularly among the so-called Magnificent Seven in the tech sector.

Since the start of this year, the overall market has gained about 0.48%. While it’s still quite early in the year, this momentum could be promising for future growth.

Currently, only two out of the seven MAG stocks—Alphabet and Amazon—are showing positive performance. The rest, well, they’re struggling a bit. For instance, Tesla has dropped 4.73%, while Apple isn’t far behind with a 4.83% decline.

The drop in these major stocks is notable. Their market valuations have ballooned in recent years, now making up over 30% of the S&P’s total value. This means that even if you’re investing in an S&P 500 ETF, the fortunes of the MAG stocks largely steer the overall performance.

To underline the concern among analysts about this concentration, Thorsten Slok, chief economist at Apollo Global Management, highlighted some critical points in a recent note.

Many on Wall Street are anticipating that the dominance of the Magnificent Seven might not last through this year. After all, valuations can’t keep soaring indefinitely.

Lisa Charette, a chief investment officer at Morgan Stanley Wealth Management, believes there’s a healthy shift happening. Investors seem to be pivoting away from tech stocks towards non-tech shares in the S&P.

In her recent note, she stated, “We see the continuation of several factors promoting healthy diversification among the current ‘Top 10’ components. For one, the growth rate of the Magnificent Seven is slowing down, while the growth rate of the other 493 stocks is improving. Moreover, the tech giants are reducing their share buyback activities as operational cash flows tighten.”

This change feels fairly positive for traders. The Equal Weight S&P’s performance yesterday suggests that even if the MAG stocks falter, the rest can still bring in profits.

Ed Yardeni of Yardeni Research mentioned this morning that the S&P 500 bull market is broadening as expected for the year. Interestingly, both the S&P 400 and S&P 600 are outperforming the S&P 500 right now.

Indeed, the performance of the 493 stocks has been notable, especially in contrast to the Magnificent Seven since last November, and this trend could carry on into 2026 as larger lagging stocks start to catch up.