Magnificent 7, from a stellar 2024 to a “normal” 2025?
Last Update: 25/12/2024
For David Kostin, chief U.S. equity strategist at Goldman Sachs, the S&P500 index is expected to maintain a positive sentiment in 2025, thanks to still-growing earnings, a positive macro picture, and stable bond yields.
But while the growth seen in 2024 by the main U.S. equity index is mainly the result of the performance of the so-called Magnificent 7, in 2025 the tune could change.
In the chart above we see how the Magnificent 7 Index, an equated index of the major Big Techs ( Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, Tesla), has decisively outperformed the S&P500. In 2024 alone, Goldman Sachs reports, the “seven sisters” outperformed the rest of the S&P500 index by 30 percent.
The lion’s share, hardly a surprise, was taken by Nvidia, but it performed decidedly well–this yes, perhaps, is news, even Meta (these are the brown and purple lines in the chart above). The other five majors performed closer to that of the benchmark index.
But 2025, as anticipated, may be a bit different. According to Kostin, the magnificent seven could outperform the rest of the basket by only seven percentage points. This would be the smallest gap since 2018. While the microeconomic factors that have driven the big tech companies should remain active in the coming year, Kostin continues, on the other hand positive macroeconomic factors will begin to push the other 493 companies in the S&P.
Even within the group of the magnificent seven, the balance could shift, increasing the potential for companies leveraging AI at the expense of those creating dedicated AI infrastructure.
