Financial expert warns: Focus on the Magnificent Seven in the 2024 US stock election or diversify more broadly? Possibly momentous decision.

Financial expert warns: Focus on the Magnificent Seven in the 2024 US stock election or diversify more broadly? Possibly momentous decision.

According to a report by ch.marketscreener.com,

2023 was an impressive year for US stocks, especially for the so-called “Magnificent Seven” – Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms and Tesla. These stocks rose between 50% and 240% and were largely responsible for the S&P 500's rise. Fund managers now have to decide whether to stick with these stocks or focus on other parts of the market.

The weighting of these seven stocks in the S&P 500 has a significant impact on the index and the broader market. If these stocks are no longer as dominant as before in 2024, this could lead to volatile conditions. The possibility of a US Federal Reserve interest rate cut and the development of the US economy will also be important factors.

The Magnificent Seven's rally has also shown impact on other segments of the market such as the small-cap index. There are signs that the rally could extend to other areas of the market, but overvalued valuations and profit-taking could also lead to a correction.

It is therefore advisable for fund managers to diversify their portfolios and prepare for potential rotations into small or mid-cap technology stocks in 2024. Investing investors may also need to own “a little bit of everything” as ownership of individual stocks could broaden significantly.

It remains to be seen how the situation develops, but it is clear that the decisions of fund managers and the development of the Magnificent Seven will have a significant impact on the US stock market and the broader financial industry.