The Magnificent Seven Beat the Market 200 to 1 in 2023
The Magnificent Seven Beat the Market 200 to 1 in 2023
By:Tim Knight
Let’s look at the performance of the mega-stocks individually and collectively
The year 2023 has been all about The Magnificent Seven. These mega-caps have carried the market.
But their amazing returns aren’t necessarily a healthy thing. This goes directly to the topic of market breadth.
In a true bull market, the gains in stocks are widely distributed across both sectors and the sheer quantity of issues which are appreciating. If just a tiny handful are accounting for almost all the gains, it means that the weakness beneath the surface is hidden and the market is far too dependent on a tiny subset of companies for its overall strength.
Suppose you were a school teacher, for example, and in your class of 25 students, you had one genius with record test scores and 24 other students who were barely passing. It would not be a reason to cheer. You’d probably prefer a class full of solid "B" students, as opposed to one superstar and 24 failing kids.
In much the same manner, it is healthier for a market to have broad-based strength, even if that strength is modest.
As for the magnificent seven, here are the percentage returns for the past year for these beasts, with Nvidia, in particular, up way over 200%.
Using the Personal Symbols feature in SlopeCharts, I slapped them all together into a new symbol called $$MAGNIFICENT, and you can see how their combined prices look.
Overall, this monster has more than doubled in less than a year. But is that representative of the stock market? You already know the answer.
Below is the past year for the S&P 500 equally-weighted index. Did that return over 100%? Almost. Just take out the last two zeroes, and you'll get the correct result: 1%. One. Per. Cent.
Using the Personal Symbols feature in SlopeCharts, I slapped them all together into a new symbol called $$MAGNIFICENT, and you can see how their combined prices look.
Overall, this monster has more than doubled in less than a year. But is that representative of the stock market? You already know the answer.
Below is the past year for the S&P 500 equally-weighted index. Did that return over 100%? Almost. Just take out the last two zeroes, and you'll get the correct result: 1%. One. Per. Cent.
Suffice it to say, if tech stocks ever stop doubling every year, this stock market is going to find itself orphaned.
Tim Knight, a charting analyst with 35 years of trading experience, hosts Trading Charts, a tastylive segment airing Monday-Friday. He founded slopeofhope.com in 2005 and uses it as the basis of his technical charting and analysis. Knight authors The Technician column for Luckbox magazine.
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